August 24, 2022
6 DeFi Protocols To Watch | Summer 2022
Our expert Ops team here at Conduit recently evaluated over 200 protocols as potential yield sources for our clients looking to provide their users with crypto-backed yield.
This evaluation represents the first phase of a robust, multi-step curation process designed by our team to ensure that we’re connecting builders with the safest and most secure protocols. This process is important to our goal of reducing complexity and risk of integrating DeFi for builders, so they can focus on making great products for their users.
In this first phase of our research, protocols were evaluated using the following criteria:
- USDC TVL - The Total Value Locked (TVL) is a measure to understand the amount of funds deposited into the protocol
- Utilization - The higher the utilization rate, the more difficult it can be to withdraw funds
- Yield - How high the annual percentage yield (APY) is on the protocol
- Security - Highlights audits, their frequency, and other security processes
- History - How long the protocol has existed, and the protocol's track record during that time
- Transparency - How forthcoming the protocol is about its assets, liabilities and inner-workings
Our Ops team uses these criteria together to evaluate the overall potential of the protocol. No protocol is perfect in each of the criteria – if they were, this would be a much easier exercise! Rather, evaluating protocols involves weighing the strengths a protocol has in some areas against any weakness it may have in others.
With that in mind, here are 6 protocols we are watching as potential yield source partners as our curation process continues.
Aave is a decentralized finance protocol that lets people lend and borrow cryptocurrencies and real world assets without having to go through a centralized intermediary.
Aave has the lowest yield among the protocols we're watching, but boasts a long, impressive history of secure use. As well, the protocol has by far the largest USDC TVL on this list – with over 1.5b in USDC on the platform.
Additionally, Aave V3 has been audited several times, the results of which are posted for viewing.
Spool allows users to participate in a subset of yield generating protocols in a risk diversified, automatically managed, efficient fashion, with a 10% performance fee.
As of August 2022, Spool's yield of 0.93% is increased by 5.62% through governance tokens.
Though it is a newer protocol without a lengthy history, Spool's increased emphasis on transparency has made it especially interesting to us. We'll be watching it closely.
Credix is a permissioned protocol that allows access to DeFi investment opportunities that are connected to real-world assets, focusing on institutional players to get exposure in emerging markets.
We're especially bullish on Credix's underwriting methodology, as well as the relationship between the senior pools, reserve pools and junior pools, which mitigate the risk usually associated with utilization rate.
Clearpool allows selected institutions to borrow funds from a decentralized network of lenders without the need for collateral. The protocol operates by offering different pools with their respective yield rates. The utilization and yield in the graphic is the average of the multiple pools.
Clearpool's TVL and Yield are both on the higher end of this list. As well, the protocol has been audited by Certik and Pessimistic.
Centrifuge / Tinlake
Centrifuge is a smart-contract based marketplace of asset pools. Borrowers turn their assets into NFTs, as a representation of their assets' value, and use those NFTs as collateral. Tinlake also offers junior and senior pools, similar to Credix’s strategy.
Allows lenders to earn returns on loaned cryptocurrencies while having full transparency on how the loaned capital is allocated. Vetted borrowers, meanwhile, can use TrueFi for rapid access to fixed-term, fixed-rate cryptocurrency loans. It is also possible to obtain additional returns through staking of the TrueFi native token through their system.
Also Worth Watching
Check back for more in our curation series, as we outline the evaluation process every protocol goes through before being integrated into Conduit.