Unwrapping The Internet Computer DeFi Ecosystem

Decentralized Finance (DeFi) rose to the ranks in 2020, beginning its TVL at just $1 billion by June 2020. However, by August 2022, DeFi’s TVL has grown at least by 40x to a total of $40 billion to $69 billion. DeFiLlama and DeFi Pulse are the two primary data aggregators for the DeFi industry, and at its peak in November 2021, DeFi was measured to be worth $100 billion to $200 billion, an astronomical number to be comprehended, especially given the entire crypto market cap of almost $3 trillion at that time.

Decentralized Finance (DeFi) is just finance in a decentralized way, and it generally includes protocols and services such as decentralized exchanges (DEXes), lending, collateralized debt positions (CDP), bridging, liquid staking, yield, services, derivatives, algo-stables, yield aggregators, cross-chain, insurance, launchpads, payments, options, indexes, synthetics, staking, farming, NFTs, and the list goes on and on.

Interesting to note though is that DEXes and lending account for most of the TVL that gets put into DeFi protocols. So this means there’s still so much room to grow in terms of new types of DeFi services and innovative financial products.

Therefore, DeFi is one of those industries where the possibilities are endless, as many developers and entrepreneurs think of ways to exchange money and improve on the current Web2 and traditional finance (TradFi) industries.

Currently, there are approximately 4.8 million DeFi users (as measured by unique DeFi blockchain addresses) and Ethereum has a 63% market share. As with all things crypto, Ethereum has been a first mover and thus always has that advantage, however, over time, many other protocols have arisen on other chains that feature great DeFi products. One of those ‘chains’ is the Internet Computer.

The image below from DeFiLlama shows the top 20 DeFi chains by TVL, and as you can see Ethereum has the most TVL and protocols. Following Ethereum in DeFi protocols is BSC, Avalanche, Polygon, Fantom, and Arbitrum, with the others being minimal. Therefore, the Internet Computer, being a top 15 smart contract platform, has a golden path to climbing the DeFi TVL ladder.

DeFi On The Internet Computer

DeFi is a growing segment being constantly built on the Internet Computer. At the moment, there are 16 ‘DeFi’ applications live on the Internet Computer.

Of these applications is a decentralized NFT marketplace called Entrepot, a decentralized bank called Dank, a Web3 job management tool and marketplace called Content Fly, a Uniswap Front End, a decentralized domain name service similar to ENS called ICNaming, a bridge called Terabethia, a non-custodial mobile wallet called Klever.io, an NFT Studio marketplace, an automated market maker (AMM) called Osmosis, and an Internet Identity trading marketplace called Dstar.

However, beyond these protocols, there are three big hitters in the swapping, DEX, and all-in-one DeFi service segments — InfinitySwap, Sonic, and ICPSwap.

InfinitySwap

InfinitySwap is an Internet Computer completely on-chain platform that allows users to create, stake, and swap ETH & IC tokens with low fees.

InfinitySwap’s primary feature at the moment is token swaps where users can simply swap a token for another. On InfinitySwap, users can actually swap mainnet ETH with low gas. More than just a swap, InfinitySwap is also a decentralized exchange that when it goes live will allow users to swap for governance tokens, vote on governance, create new tokens, and provide liquidity by trading and providing liquidity to ICP-ETH pools.

Moreover, InfinitySwap also has a staking feature where users can stake their ERC20 or IS20 tokens in one of their dedicated pools. This will allow investors and traders to earn rewards through staking and liquidity mining the tokens they hold.

Lastly, InfinitySwap allows you to create your own token, this means InfinitySwap is building a decentralized gateway between the Internet Computer and Ethereum networks.

2. Sonic

Sonic is another DeFi platform that once fully completed will be a supersonic suite of apps accelerating DeFi on the Internet Computer. At its current stage, Sonic does swapping and liquidity, however, moving forward it will also be releasing farming, token issuance, governance, and a launchpad. So there’s tons of features in the pipeline.

Sonic’s swap feature can swap ICP, OGY (Origyn Foundation), XTC (Cycles), BOX (Box Token), and WICP for WICP and XTC (Cycles). So the current functionality remains for those tokens within the Internet Computer ecosystem.

(Sonic swapping dashboard)

Sonic’s liquidity feature has the same coin choices, which means it’s still catered towards Internet Computer ecosystem tokens like OGY, BOX, Cycles, and WICP.

According to Sonic analytics, it has $1.6 million in liquidity and a daily volume of 1,700 transactions, therefore, it’s still very early days as well for Sonic. However, functionality-wise, the protocol is up and running, which means once more activity, trading, and liquidity come to the platform, things will take off.

3. ICPSwap

Last but not least is ICPSwap, a decentralized exchange (DEX) serving as a hub that provides a full-stack of financial, market, and DAO services on the Internet Computer. ICPSwap provides a platform for minting tokens, pools, swapping and liquidity providing, token listing, and chatting and messaging.

ICPSwap has just released its official version and it’s probably the most advanced DeFi application currently running on the Internet Computer. So to take a deeper dive into its functionality, we’ll be writing a follow up informative exploration ‘How To’ article on its features.

Conclusion

DeFi is still an early and growing segment on the Internet Computer with 16 applications in total. So moving forward in 2022, if the bear market comes to an end, more and more activity will come into the segment and we’ll see another spurt of growth. The three main applications above are still working on their primary features, and only ICPSwap is really ahead of the game. So it’s still early in the DeFi market for the Internet Computer, 2022 will be exciting to witness once these functionalities are all released.