eToro is a major Israel-based brokerage and social network with 23 million registered users around the world. The company is now offering a new $1,000 minimum DeFi crypto portfolio. DeFi stands for “decentralized finance,” which allows smart contracts to provide financial products without a third party like a bank or brokerage firm.
eToro recently reported that it has 2 million funded accounts to buy stocks and cryptos. The company was planning on going public in the third quarter via a reverse merger with a special purpose acquisition company (SPAC). Recently, that SPAC, Fintech Acquisition Corp V (NASDAQ:FTCV), postponed the merger until the fourth quarter.
However, eToro is going forward with this new portfolio of DeFi crypto assets. Of the top seven cryptos that will make up the majority of the portfolio’s assets, a good number of them have a high correlation with Ethereum. However, they each have unique features that will make them very useful in the new and exciting DeFi world.
These seven DeFi crypto tokens that will be in the eToro fund have a good chance of doing well over the next year:
- Ethereum (CCC:ETH-USD)
- Algorand (CCC: ALGO-USD)
- Polygon (CCC: MATIC-USD)
- Chainlink (CCC: LINK-USD)
- Basic Attention Token (CCC:BAT-USD)
- Decentraland (CCC:MANA-USD)
- Uniswap (CCC:UNI-USD)
DeFi Crypto: Ethereum (ETH-USD)
Market Cap: $336.2 billion
Ethereum is the second-largest cryptocurrency compared to Bitcoin (CCC:BTC-USD) which has a market cap more than twice its size at $780.5 billion. Moreover, Ethereum is increasingly seen as a more relevant and worthwhile investment from an institutional investors’ standpoint.
According to a recent Standard Chartered research report, the “Ethereum Investor Guide,” the crypto has a good deal of appeal to institutional investors. They called it “akin to a financial market.”
The report goes on to talk about decentralized finance and Ethereum’s central role. It is the leader in this new frontier in blockchain technology.
Additionally, Ethereum 2.0 was recently launched. It uses a proof-of-stake (PoS) validation method for its blockchain rather than the existing proof-of-work system. This will eventually be the case for the “mainnet” Ethereum when it merges with Ethereum 2.0 sometime next year.
The Standard Chartered report estimates Ethereum will outperform Bitcoin sometime in the next five years. This might be a good time for new DeFi crypto investors to get in on this major blockchain asset.
Market Cap: $9.7 billion
Algorand has been on a tear in the past month, surging more than 74% to $1.7394 as of Sept. 25. Investors are excited that the crypto could become a significant factor in the DeFi space. It is a PoS blockchain designed to compete with Ethereum on a broad scale.
According to Decrypt magazine, Algorand is designed to be a fast and scalable system for decentralized applications (dApps) and DeFi protocols. This is is exactly what DeFi apps enable users to do — trade, borrow and lend crypto assets without third-party intermediaries.
Recently, several news events have helped push ALGO tokens higher. For example, a hedge fund run by Anthony Scaramucci, Skybridge Capital, announced it had invested $700 million in Algorand. Additionally, the fund is raising $100 million for an exchange-traded fund (ETF) related to the crypto.
Scarmucci told CNBC, “Algorand is going to be the winner in building the backbone for what institutions need and financial services companies need.”
On top of that, the government of El Salvador signed an agreement with Koibanx, a leading Latin American asset tokenization and blockchain financial infrastructure company.
The firm will help El Salvador build its blockchain infrastructure using Algorand. The final product will provide services like a tracking system for Covid-19 cases, a credit issuance system and smart contract financing apps.
Look for Algorand to continue to outperform over the next year.
DeFi Crypto: Polygon (MATIC-USD)
Market Cap: $7.1 billion
Polygon is a layer-two Ethereum blockchain, meaning it is built on the latter. It changed its name from Matic to Polygon in Feb. 2021 to signify its change to an interoperable and scaling network, which is useful to DeFi applications.
Polygon now bills itself as “Ethereum’s Internet of Blockchains.” It functions as a platform that enables developers to launch preset blockchain networks.
Developers have access to a growing number of modules. These software packages allow them to create specific blockchains with more functionality, including DeFi applications.
Polygon’s architecture, according to Decrypt magazine, has four layers, including Ethereum, security, networks and execution. The Ethereum layer allows a Polygon-based app to use smart contracts at a faster and cheaper throughput speed than Ethereum.
Ethereum’s fundamental problem is its lack of scalability. The greater the number of transactions, the greater its congestion. The time it takes to validate each transaction has been rising.
By contrast, Polygon has a way of getting around the scalability problem. It builds “snapshots” of various chains and uses them in the blockchain network.
DApps depend on transaction speeds. This is especially true in the DeFi arena as these apps gain popularity. Polygon can help make their transactions go through without the typical problems Ethereum can present.
Market Cap: $10.4 billion
Chainlink is the 15th largest crypto with just over $11 billion in market value. Its performance as a cryptocurrency is correlated to Ethereum’s, as I recently wrote.
Chainlink is built on an Ethereum platform, but it specializes in providing “oracle” blockchain technology. It assists Ethereum contracts and other smart contracts with third-party data integration.
For example, Mark Cuban recently invested in a blockchain app called dClimate. The app uses Chainlink’s oracle technology to provide large amounts of climate data and up-to-minute data on climate systems. dClimate will use this to become a decentralized marketplace for current climate data, forecasts and models, connecting data publishers with buyers.
Chainlink Labs is a foundation that promotes Chainlink’s development and usage as a decentralized oracle technology. Decentralized oracles query multiple data sources and thus increase the reliability of blockchain smart contracts.
As a result, as smart contracts and Defi apps grow, expect to see the usage of Chainlink increase over time. This will help push the price of LINK tokens higher. At $24.74 per LINK token as of Sept. 26, the DeFi crypto has already risen 108% year-to-date (YTD). This is based on its year-end price last year of $11.87.
But that should not limit your view of its potential upside. As usage of data sources in smart contracts rises, Chainlink has a good chance of becoming more popular.
Defi Crypto: Basic Attention Token (BAT-USD)
Market Cap: $888 million
The reason it’s called Basic Attention is that users receive a token for visiting participating websites. Moreover, website publishers receive tokens based on their content and the attention paid to them. Therefore, advertisers get “better user targeting, an improved ROI, and reduced fraud,” according to Binance Research.
The BAT token is integrated into Brave Software’s web browser, Brave, to allow tracking for these rewards. Brave automatically blocks online advertisements and website trackers in its default settings. However, it privately monitors the attention of users to reward publishers and users. Recently, Brave developed its own search engine that has the same level of privacy and tracking rewards.
Market Cap: $1.2 billion
Decentraland (MANA) is a virtual reality platform on the Ethereum blockchain platform. It bills itself as the “first-ever virtual world owned by its users.” It allows users to create, experience and monetize content and applications in the Decentraland platform.
It’s kind of a fantasy life where users can buy land, build on it and monetize it if they want. For example, there are entire villages as well as a dungeon, and even space travel and adventures.
Users can take the MANA token to buy outfits, virtual scenes and land parcels. There are 90,000 units of LAND, a non-fungible token (NFT). Users can buy parcels of it in a secondary marketplace. To buy anything, you first need to get hold of MANA, either on the Binance exchange or Coinbase (NASDAQ:COIN).
Decrypt magazine says the user experience is not as good as Microsoft’s (NASDAQ:MSFT) Minecraft game or the social site Second Life. The author said his experience using Decentraland was very lonely. One reason is there is no way to interact with other users on the site. However, this summer, the site held one of the first virtual music festivals online. Users could buy NFTs and other items, like outfits.
Assuming the site can start to develop other unique features like this, it and the token can take off in popularity. Over time, people may find virtual life an interesting way to play out their alternative lifestyle wishes.
Defi Crypto: Uniswap (UNI-USD)
Market Cap: $14.6 billion
Uniswap (UNI) is a decentralized crypto exchange (DEX), which Decrypt magazine calls one of the “core products” in the DeFi arena. It is “decentralized” since there is no organization that oversees the management of the exchange. For example, a normal stock, commodity or crypto exchange has management and developers monitoring the operations.
The exchange allows users to trade Ethereum or ERC20 tokens. ERC20 tokens are an offshoot Ethereum token. The user can trade these for any other cryptocurrency. Users must present their digital wallets to fund the transfers. However, since Ethereum requires “gas” fees, which are essentially transaction fees, Uniswap is not transaction-free.
Uniswap essentially uses smart contracts to execute transfers between cryptos. However, it has also generated a large amount of revenue for liquidity providers. Cointelegraph reports that Uniswap is the first DEX or even the first DeFi contract to generate more than $1 billion in fees for liquidity providers.
With the new EIP 1559 upgrade to Ethereum, which I have written about previously, Uniswap is adding new features with its own upgrade called Uniswap v3. This upgrade provides a concentrated liquidity feature and custom yield products that allow users to earn interest paid in UNI tokens. One writer predicts this Uniswap feature could spark the creation of a new futures industry for DeFi and cryptocurrencies.
This could become a catalyst for UNI tokens to rise further. So far, Uniswap tokens are more or less flat for the year. So now might be a good time to get in, especially if Uniswap interest takes off.
On the date of publication, Mark R. Hake owns a long position in Bitcoin and Ethereum but did not own any other security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.