Best DeFi Projects

Best DeFi Projects and Coins for 2024

Our analysts evaluated each DeFi project based on key metrics such as total value locked (TVL), market share, and the uniqueness of their financial innovations, such as restaking and yield tokenization. They also considered factors like governance mechanisms, the role of native tokens, and each project's competitive positioning within its sector to assess the overall impact and potential ROI.

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1. Lido

Lido is the best liquid staking project and has $23.5 billion in TVL. Founded in 2020, the protocol offers a different way to stake Ethereum through stETH (a token that mirrors staked ETH). This lets users stay liquid while staking, meaning they can trade, lend, or use stETH in other DeFi platforms. Lido's reach extends over five blockchains, including Ethereum and Solana. The decentralized setup spreads staking risk among various validators and stETH gains value as rewards accumulate.

With Liquid Staking Derivatives (LSD tokens) like Lido's stETH, you enjoy staking benefits without typical lock-up periods—boosting capital efficiency and accessibility in DeFi. Lido also has its native token, LDO, which plays a key role in governance. LDO holders can vote on crucial proposals within the Lido DAO, influencing decisions on protocol upgrades and fee structures.

Lido's top competitors include Rocket Pool, Jito and Mantle, though the word "competitor" might be a stretch as Lido accounts for 60% of the LSD sector.

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2. AAVE

Aave is the oldest project on this list and a reminder of the DeFi golden age. Founded in 2017, Aave now has $10.5 billion TVL (peak of $51 billion in 2022) and holds a 36.3% market share in the lending category. Aave enables users to lend and borrow a wide array of cryptocurrencies without intermediaries. The platform operates over 140 yield pools across 12 chains, offering competitive annual percentage yields (APYs) such as 4% on stablecoins like USDC and 6% for WETH.

The AAVE token serves multiple purposes within the ecosystem: it is used for governance, allowing holders to vote on protocol changes, and it can be staked to earn safety incentives and help secure the platform. Through its innovative approach, Aave facilitates efficient capital utilization and democratizes access to financial services. Aave's top competitors include Spark, Compound Finance, and Morpho. The AAVE token is the largest by market capitalization from the list with $1.44 billion.

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3. EigenLayer

EigenLayer is the most trending project on this list, having created its own category—restaking. Restaking addresses inefficiencies in Ethereum by allowing users to reallocate their staked assets, which increases security for various applications while earning additional rewards. Traditionally, each new application on Ethereum required its own staked asset pool, leading to resource fragmentation. EigenLayer was founded in 2023 in order to take advantage of this opportunity.

With a TVL of $11.8 billion and an 85.5% dominance in the restaking category (the highest for any top project), the platform offers mechanisms to boost yield generation. In 2024, EigenLayer launched an EIGEN token, however, the airdrop led to huge controversy due to its distribution—55% of the tokens were allocated to investors and the team, which many considered unfair. Additionally, excluding users from the US and other regions, along with initial token non-transferability didn't go well.

Eigen's top competitors include Symbiotic and Karak who are still trailing behind with a combined TVL of less than $2 billion.

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4. Pendle

Pendle has revived yield farming in 2024 with its creative approach to tokenizing yield. The protocol's key feature is splitting yield-bearing assets into two components: Principal Tokens (PT) and Yield Tokens (YT). PTs represent the principal and are ideal for fixed-yield opportunities, while YTs allow users to speculate on future yield changes. Pendle’s Automated Market Maker is tailored for efficient PT and YT yield trading with concentrated liquidity and a dual fee structure to minimize impermanent loss.

By locking PENDLE tokens, users earn vePENDLE, granting governance rights, influence over protocol decisions, and a share in the protocol’s earnings. Despite a drop from a $6.7 billion TVL to $2.4 billion due to a market crash that decreased PENDLE's price by 33% in a month, the token is still up 240% over the past year, making it the best-performing token on this list. Pendle’s closest competitors include Convex Finance and Aura, though Pendle remains a leader in yield farming.

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5. ether.fi

ether.fi concludes our exploration of the best DeFi projects, standing out in the liquid restaking category. It is different from protocols like Rocket Pool and Lido as it gives stakers full control over their validator keys, which is crucial for validator node exits. ether.fi's eETH and weETH are Natively ReStaked tokens that offer both staking and restaking rewards without the need for additional actions or lock-ups, allowing immediate redemption of ETH as long as liquidity is available.

Users holding eETH and weETH earn rewards based on the protocol’s yields and restaking returns, including EigenLayer points. The ETHFI token allows community members to influence protocol growth, participate in decisions like protocol upgrades, and manage treasury activities. ether.fi leads the liquid restaking sector with a TVL of $4.44 billion, ahead of competitors like Renzo, Puffer Finance, Eigenpie, Kelp Dao, and Swell.

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What is Decentralized Finance (DeFi)?

DeFi expands crypto's use cases beyond Bitcoin's store of value by providing a range of financial services on decentralized platforms. Projects like Lido, AAVE, EigenLayer, Pendle, and ether.fi highlight the diversity within DeFi. DeFi also encompasses sectors like decentralized exchanges (Uniswap, Raydium) and decentralized derivatives, many of which have their own native tokens and ecosystems with decent total value locked.

It's not uncommon for new use cases and variations of them to pop up in every cycle. This time we have liquid staking, restaking, and liquid restaking. DeFi's unique selling point has always been the ability to "be your own bank". This attracts users by offering higher yields and unique strategies possible only in crypto. Finally, the shortcomings of traditional finance and non-self custodial services, such as centralized exchanges, are a major catalyst for decentralized finance.

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Is DeFi a Good Investment in 2024?

Investing in decentralized finance remains a viable option in 2024, regardless of the decrease in overall popularity. The current market size of DeFi is $120 billion (staked assets included). This is quite lower than the peak of $217 billion before the Terra Luna crash in 2021, which eroded some trust in DeFi. The market cap of DeFi coins is $66 billion, also down a lot from the high of $178 billion.

Projects like Eigen and Pendle have attracted capital back to DeFi but the overall trend shows that allocation has shifted more onto other crypto narratives, such as meme coins, which are mostly speculative assets with zero yield-generating features.

On the plus side, DeFi projects and coins are undervalued and have more room to grow based on the ratio of TVL and market cap in the past years (see image below). Since there are two ways to invest in decentralized finance — either by buying DeFi coins or by actually participating in onchain activities, this is a good visualization that shows which one is more undervalued at the moment.

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Bottom Line

The top projects in decentralized finance for 2024 are Lido, AAVE, EigenLayer, Pendle, and ether.fi. They represent the most recent improvement in liquid staking, lending, ether restaking, and yield farming. DeFi coins may not pump as high as some other speculative assets, but they offer numerous ways to earn additional yield rewards and are a valuable application of blockchain technology. Because the market is undervalued compared to its peak several years ago, investors are constantly looking for the best opportunities.