DeFi Protocols: A Comparison Between Compound Finance, Aave & TradeFinex

What are DeFi protocols

DeFi protocols are digital money lending platforms that are built on a blockchain. These protocols have a set of standards that are usually implemented via smart contracts and that can be accessed by any stakeholder or DeFi application.

How do different Defi protocols compare

Different DeFi protocols have unique features that influence their operations. Exploring three major protocols — Compound Finance, Aave &TradeFinex — spotlights how they compare.

DeFi Protocols: A Comparison between Compound Finance, Aave & TradeFinex

#1. Compound Finance

Compound finance is a leading lending protocol that allows users to lend or borrow popular cryptocurrencies like Tether, Dai, and Ether.

Compound Finance

Built On & Use Case

Compound’s protocol is built on the Ethereum blockchain. The protocol establishes money markets (pools of assets whose interest rates are derived via an algorithm), based on demand and supply for each asset class.

Smart Contract Origination & Regulation

Compound’s smart contracts are on-chain. This implies that data in the Compound’s smart contract is stored within the system’s blockchain. Being stored on the blockchain ensures that the information is available to all parties within the system.

Fees

Within Compound’s protocol, interest rates or compound finance fees are determined by an algorithm. To figure out the current interest rates, a user should visit the Compound Finance markets page.

Capital Locked in Compound Finance

Estimates by Defi pulse show that compound’s daily transactions are around $754.39 million, as of writing.

Compound’s Approximate Market Size

Today, the compound’s approximate market size is close to $2.7 billion in volume ( lending and borrowing) as of writing. With more innovations in the crypto-lending space coming onboard, Compound Finance’s market size is set to surpass the current level.

#2. Aave

Being an open-source and non-custodial protocol, Aave enables the creation of money markets where users can borrow assets and earn interest on deposits.

Aave

Built On & Use Case

Aave protocol is built upon the Ethereum blockchain, where it is implemented as a set of smart contracts. The smart contracts guarantee safety and eliminate the need for middlemen. Users and Dapps interact directly with the blockchain data and smart contracts through their favorite web3providers.

Smart Contract Origination & Regulation

Aave’s smart contracts are on-chain. Similar to the Compound finances protocol, Aave’s on-chain smart contracts ensure that all stakeholders can access the information.

Fees & Capital Locked

Fees associated with Lend, Aave’s native governance token, are 0.09% of flash loans, and 0.25% of the originated loans. These fees go towards rewarding lenders, burning LEND, and compensating affiliates.

Funding Channels

Aave funding channels are mainly crypto-based. To enhance effectiveness, the Aave protocol supports close to 20 Ethereum-based assets.

Approximate Market Size

Aave’s market cap is approximately $404,266,807.

#3. TradeFinex

Tradefinex is a peer-to-peer decentralized platform that allows Trade Finance originators to distribute deals to a variety of bank and non-bank lenders/funders.

TradeFinex

Built On & Use Case

Built on XinFin — a public/private hybrid blockchain platform — , TradeFinex’s architecture is powered by XDC01 Protocol in which the XDC is the native digital asset. (XinFin’s hybrid architecture is derived from a fork of Quorum and Ethereum).

Smart Contract Origination

Trdefinex’s smart contracts combine aspects of on-chain and off-chain architecture. The hybrid system introduces key benefits that make the protocol highly exceptional.

Smart Contract Regulation

With XinFin being listed on Abu Dhabi Global Market(ADGM), Tradefinex’s protocol is regulated by the laws governing the ADGM. Specifically, legislation like the Financial Services and Markets Regulations (FSMR), detail the requirements that TradeFinex must meet to receive full authorization by the Financial Services Regulatory Authority (FSRA).

Fees

Tradefinex protocol offers exceptionally low transaction fees. Precisely, the transaction costs on the Xinfin network are roughly 0.00042% of the transaction amount.

Capital Locked & Funding Channels

As of writing, the amount of capital locked within the Tradefinex’s protocol is roughly 1.1 Billion XDC or approximately USD 6.6 Million.

Approximate Market Size/Opportunity

Noting that Tradefinex supports the global trade/infrastructure finance market, the trade finance market size was roughly USD 63.540 billion in 2019 and is estimated to surpass the USD 79.410 Billion by the end of 2026, with the 2021–2026 CAGR being 3.2 percent.

Bottomline

While Compound Finance, Aave, and TradeFinex are outstanding protocols, Tradefinex’s features and architecture make it more feasible. Thanks to the hybrid nature of the XinFin blockchain, the TradeFinex protocol guarantees safety of sensitive data and that the system is transparent and verifiable.

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