Four Projects Enhancing Core DeFi Primitives on Ethereum
DeFi primitives have come a long way since their inception, evolving from simple concepts into highly sophisticated systems that enhance risk management, yield optimization, and liquidity. The four core primitives driving decentralized finance across Ethereum and its interconnected EVM chains—lending, liquid staking, spot trading, and stablecoins—are now more advanced than ever. While additional primitives such as perps, yield optimization, liquidity aggregation, and RWAs exist, these four dominate by TVL. Despite their foundational roles, they’ve undergone significant advancement, as demonstrated by just a handful of projects that showcase Ethereum’s evolving DeFi ecosystem.
**Lending: Silo Finance**
Lending and borrowing are at the heart of DeFi, and Silo Finance excels in both areas. Offering a familiar DeFi model—deposit crypto assets, borrow stablecoins, and repeat—Silo distinguishes itself with its innovative approach to risk management. Unlike the earlier lending protocols, Silo isolates each lending pool, making them self-contained and independent of one another. This structure ensures that issues in one pool—such as insolvencies or hacks—do not disrupt others, maintaining the protocol’s integrity and preventing widespread failure. This unique design captures the best of DeFi: composability, enabling integration with other protocols to create novel money markets, while safeguarding users from broader systemic risks. Silo’s growing TVL, expanding user base, and reputation as a smart lending protocol highlight its success.
**Liquid Staking: Liquid Collective**
Since Ethereum’s transition to Proof-of-Stake in 2022, liquid staking has become a foundational element of its DeFi ecosystem. Liquid Collective, though not the largest liquid staking protocol by TVL, is a standout in the space. The protocol takes liquid staking a step further by offering an enterprise-grade solution through its token, LsETH. This token enables users to earn staking rewards while interacting with other DeFi protocols. Liquid Collective exemplifies how liquid staking can be both secure and user-friendly, offering daily auto-compounding to maximize APR, all while maintaining a strong reputation for reliability and robust growth in TVL.
**Trading: Balancer**
Spot trading in DeFi has matured well beyond the simple Token A > Token B model popularized by Uniswap, and Balancer is leading the charge in this evolution. Balancer’s V3 introduces an advanced version of its automated market maker (AMM) protocol, extending composability and customizability while also improving user experience. Balancer allows liquidity pools with up to eight tokens, each with customizable weightings, offering immense flexibility for liquidity providers. This flexibility facilitates efficient capital allocation, enabling pools that reflect specific market views or investment strategies. What sets Balancer apart is its ability to balance innovation with practicality. Its pools can integrate into other DeFi protocols, creating complex financial instruments like yield-bearing stablecoin pools or leveraged strategies. Additionally, its impermanent loss protection and dynamic fee structures ensure that liquidity providers are fairly rewarded.
**Stablecoins: Usual**
Stablecoins play a crucial role in DeFi, providing stability in an otherwise volatile ecosystem. But Usual is redefining stablecoins by transforming them into high-yield-generating assets. Usual’s stablecoin is backed by tokenized real-world assets (RWAs) such as U.S. Treasury bills, and it redistributes the profits from these assets through a rebasing mechanism. This allows USD0++ holders—a yield-bearing version of the stablecoin—to earn real yield without relying on traditional lending markets. With over $700M in TVL, Usual is demonstrating the potential of combining stablecoins with RWAs to unlock sustainable returns, underscoring the symbiotic relationship between DeFi and the tokenization of real-world assets.
In just five years, DeFi has advanced significantly, as illustrated by these projects. From Silo’s isolated lending markets to Usual’s high-yield stablecoin, decentralized finance on Ethereum continues to push the boundaries of innovation, proving its potential for future growth and transformation.