The 15 Most Promising Small-Cap DeFi Projects to Invest in 2021
Most of the big fortunes accumulated over the past ten years were hammered together in the crypto industry. There are dozens of public crypto billionaires, and many more who do not publicize their wealth.
How did these people make their fortunes? Some, much like Vitalik Buterin (developer of Ethereum) or Changpeng Zhao (founder of Binance), undertook something. Others relied on strategies that were beyond the reach of petty mortals, as did the founder of Alameda and FTX, Sam Bankman-Fried, who was involved in large-scale arbitrage between Asian and American exchanges. But a significant part of the crypto moguls made their money by relying on one of the simplest strategies, which involved investing in promising tokens at their launch and then just bidding out the time.
Bitcoin and Ethereum can still yield in the hundreds or even thousands of percent in returns, but in timespans of 5 to 10 years. What is then left as avenues of action for those who want the same yields, but much faster? They have to search the pits of the crypto market for promising small-cap tokens that few yet know about.
Let us take a look at the terminology first. Large-cap tokens are usually perceived as projects from the top 10 on CoinmarketCap. Mid-caps are the bunch from 10th to 50th position. Small-caps are those below the 50th position. But with such a classification, many projects with a capitalization of more than $1 billion fall under the definition of “small-cap” under the conditions of the current bull market. Therefore, in this article, we will apply a more rigorous approach and consider projects with a capitalization below $500 million as a basis for classifying them as small-cap tokens.
I spent a lot of time and selected 15 crypto projects that, in my opinion, have serious potential to grow by at least tenfold in value. All of the projects in the list were evaluated based on many factors, including the idea, market size, underlying technology, tokenomics, team, investors, community, competitors, etc.
Please be advised that none of the following should be construed as investment advice. You invest at your own risk and bear the possibility of losing all of your investment.
Band Protocol
What is Band Protocol?
The Band Protocol is a cross-chain platform for blockchain oracles. It is an infrastructure service, wherein the protocol collects data from internet sources in real time and sends it to the smart contracts. The data sources include around 200 cryptocurrencies, 20+ fiat currencies, and two types of commodities (gold and silver). The project has active integrations with many protocols, validators and exchanges. In addition, anyone can freely add their own data source. The Band Protocol runs on a public blockchain built on the Cosmos SDK using Tendermint’s Byzantine Fault Tolerance consensus mechanism.
The BAND token is used by network validators to participate in governance and as is issued as a reward. The max supply is uncapped. As of August of 2021, 100 million tokens have been issued, of which 35 million are in free circulation. The inflation rate is set in the Cosmos network and varies from 7% to 20%, so that about 66% of BAND tokens are locked at any time.
Team
The founders are from Thailand:
— Soravis Srinawakoon — CEO, previously worked at The Boston Consulting Group and Ericsson. Studied at Stanford.
— Paul Nattapatsiri — CPO, formerly from TripAdvisor.
— Sorawit Suriyakarn — CTO, previously worked at Dropbox, Quora, MemSQL. Studied at MIT.
Investors
The project raised $7.9 million from Binance, ZBS Capital, SNZ Holding, Yield Ventures, The Spartan Group, Sequoia Capital India, Woodstock Fund, etc.
Current Status
The Band Protocol is Chainlink’s closest competitor. The project was launched three years after Chainlink and so far is considerably inferior to it in terms of key indicators. But the market for blockchain oracles is growing fast and is large enough to accommodate multiple players.
What is BarnBridge?
BarnBridge is a protocol for tokenizing risks on Ethereum. The project allows users to create derivatives to hedge risks from market fluctuations of any type and thereby reduce volatility for conservative investors or increase volatility for day traders. As of August of 2021, BarnBridge has two products — SMART Yield and SMART Exposure. The team plans to introduce several more products by the end of the year.
The native BOND token is used for management and reward. 10 million BOND tokens (ERC-20) were issued at launch, which are to be distributed within 2 to 3 years. There are now 3.7 million BOND in circulation. 68% of the tokens are reserved for the community. The tokens of the team, investors and the advisors (32%) are unlocked gradually at 0.22% per week.
Team
Founders:
— Troy Murray — Founder of RUDE Labs and Universe.
— Tyler Ward — Founder of Proof Systems, a marketing agency for fintech companies. Helped with the promotion of many crypto projects.
— Bogdan Gheorghe — former employee of ConsenSys.
Investors
BarnBridge raised $1 million from several foundations and private investors. Among them are Stani Kulechov (founder of Aave), Kain Warwick (founder of Synthetix), Andrew Keys (founder of DARMA Capital), ParaFi Capita, Centrality, Blockchain Companies LLC, and Fourth Revolution Capital LLC.
Current Status
BarnBridge plans to launch several new products before the end of 2021. There are rumors that the project will be attracting more capital over the coming year.
BondAppetit
What is BondAppetit?
BondAppetit is an Ethereum-based DeFi protocol for business loans. The loans are secured by bonds or issued in exchange for bonds. BondAppetit’s mission is to give businesses from all over the world access to the liquidity of the crypto market.
BondAppetit has two tokens:
— The USDap is a native stablecoin and the main product of the protocol. It is 100% backed by bonds. Initially, the demand for USDap will primarily come from other protocols, as the team states. The first partner will be EAST.Finance (Waves Tech project), whose EAST token will be backed by USDap at 50%.
— The BAG is a governance token. The total emission of the token will amount to 100 million BAG in two years. At present, there are ~10 million BAG in circulation on the market. BAG holders can stake their tokens in a special contract and receive passive income from bonds that are backed by USDap.
Team
— Artem Tolkachev — Founder and CEO. Founder of Tokenomica and former head of Blockchain Lab at Deloitte.
— Vladislav Komissarov — CTO of BondAppetit and Tokenomica. Previously worked in IT and media companies for about 20 years.
— Sasha Ivanov — advisor. CEO of Waves Tech, a large crypto ecosystem with a market cap of over $1 billion.
Investors
The investors are unknown, but members of the BondAppetit community have suggested that the key investor is Waves CEO Sasha Ivanov.
Current Status
As of August of 2021, the project is at the MVP stage and has just acquired the first bonds to back the USDap stablecoin. The initial success of BondAppetit depends mainly on the demand for the USDap stablecoin, which will come from the Waves ecosystem.
Beyond Finance
What is Beyond Finance?
Beyond Finance is a platform for creating and trading synthetic assets. The derivatives can be based on currencies, commodities, stocks, ETFs, etc. Backing of at least 300% is required, which is half of that of the similar Synthetix protocol. The BYN token has an emission ceiling of 100 million. As of August of 2021, less than 10% of tokens are in circulation.
Team
Kenneth Moon — founder and team leader, formerly from Goldman Sachs and Barclays.
Investors
The project raised an unknown amount of investments from Huobi Ventures, DuckDao, Spark Digital Capital, Consensus Capital, GBIC, Blocksync, Moonwhale Ventures, Master Venture, GAIN Associate, X21 Digital, and OKEx Blockdream Ventures.
Current Status
Launches of the testnet and mainnet are slated for Q3 of 2021. The project is largely attracting attention at the expense of its team and investors.
Burnt Finance
What is Burnt Finance?
Burnt Finance is a decentralized protocol for organizing auctions and issuing NFTs and synthetic digital assets. It runs on the Solana blockchain, which boasts high speeds (50,000+ transactions per second) and low fees. The BURNT token is used as a medium of exchange, an instrument for users to participate in the governance of the protocol, and to save on fees. Token holders pay a transaction fee of 0.1% instead of 1%.
Team
The project was created by an anonymous user under the nickname Burnt Banksy, who became famous for burning Banksy’s works during live broadcasts.
Investors
Burnt Finance raised $3 million from two dozen private investors and funds, including Alameda Research, DeFiance Capital, Solana, Multicoin, Spartan Group, Vessel Capital, Mechanism Capital, and Hashkey Group.
Current Status
As of August of 2021, Burnt Finance only has a website landing page with a minimum amount of information. The BURNT token is not yet available on the market. It is not even known who conducted the project’s security audit (if any). Burnt is worth keeping on the radar because of its investors, since the investments from Alameda and Spartan are a proverbial mark of quality. And this means that the founders know how to get some attention at the least.
Casper Network
What is Casper Network?
The Casper Network is a Proof-of-Stake blockchain from CasperLabs and is marketed as a better version of Ethereum. Developers claim that their proprietary The Highway Protocol, which is used as a consensus mechanism, is supposedly more efficient than the Byzantine Fault Tolerant protocol.
The advantages of Casper are that its smart contracts are upgradeable and written in WebAssembly (instead of the proprietary Solidity used in Ethereum), and the fees are predictable. Casper’s developers also claim that they managed to solve the blockchain trilemma. However, in terms of decentralization, the project is not comparable to Bitcoin or Ethereum, as the number of validators in Casper is limited to 100.
The max supply of CSPR token is unlimited. As of August of 2021, there are 10 billion tokens in circulation and the inflation rate is 8%.
Team
The project has three founders:
— Mrinal Manohar — CEO of CasperLabs, spent most of his career in investments, an early investor in crypto.
— Medha Parlikar — CTO of CasperLabs, worked in a variety of technology companies in the past. — Jack Mills — an early investor.
Investors
With the ICO considered, Casper raised $28 million. Among the investors are Arrington XRP Capital, Hashkey, AU21 Capital, Evangelion Capital, and Woodstock Fund.
Current Status
The Casper mainnet was launched in March of 2021. Several projects are being developed on Casper:
— IPwe Patent Register;
— Credentia digital documents service;
— CasperSign digital signature service.
Cere Network
What is Cere Network?
The Cere Network is a Customer Relation Management (CRM) ecosystem on VC’s favorite Polkadot blockchain. Unlike traditional CRM, the Cere Network gives customers complete control over their data. Cere utilizes a SaaS business model. The CERE governance token is not yet available on exchanges.
Team
The project has an experienced team:
— Fred Jin — CEO, previously founded several technology companies and worked as a developer for many years.
— Ian Duggan — CTO, former employee of Twitch, Oracle and other technology companies.
— Kenzi Wang — Co-Founder of Cere and the AU21 Capital venture capital fund.
Investors
The project raised $28 million. There are many prominent names among its investors, including Binance Labs, Arrington XRP Capital, G1 Ventures, AU21 Capital, and Fenbushi Digital.
Current Status
As of August of 2021, Cere has already launched two testnets. The first integrations with corporate customers are underway.
Equalizer Finance
What is Equalizer Finance?
Equalizer Finance is a flash loans marketplace powered by Ethereum, BSC, Polkadot and Solana. The loans are unsecured but must be repaid in a single transaction. For the lender, such loans are virtually risk-free, since if the loan cannot be repaid in a single transaction, it is canceled. The project boasts floating fees.
Use cases include arbitrage, collateral swaps, liquidations and self-liquidations, flash minting, portfolio rebalancing, and loan refinancing.
The EQZ token gives the right to participate in project governance and has a max supply of 100 million. Around 15 million tokens are in circulation as of August of 2021.
Team
The founders are unknown. The key team members are from Luxembourg, Romania, Russia and Slovenia.
Investors
The project raised several hundred thousand dollars at an IDO and an unknown amount from venture capitalists like NGC Ventures, Rarestone Capital, Moonwhale, Magnus Capital, Blocksync Ventures, AU21 Capital, Master Ventures, Exnetwork Capital, Genblock Capital, and 18 Ventures.
Current Status
So far, the interface exists in mockup form and there is a testnet. The mainnet was scheduled for launch in August of 2021, but it seems to be behind schedule. There are many well-known crypto projects among Equalizer’s partners.
Liquity
What is Liquity?
Liquity offers interest-free loans using the native LUSD stablecoin secured by ETH with collateral of up to 110% and more. Instead of interest, the borrowers pay a commission at the time of the loan and upon its return. Commissions vary from 0.5% to 5%. In addition to the LUSD stablecoin, there is also the LQTY token. It does not give the right to manage the protocol, but allows users to participate in the distribution of profits. The emission of LQTY will be limited to 100 million. As of August of 2021, less than 10% of the tokens have been issued.
Team
Liquity has two founders:
— Robert Lauko — a lawyer from Switzerland with education in legal matters and engineering.
— Rick Pardoe — a blockchain developer from England.
Investors
The project raised $8.4 million from two dozen investors, including Alameda Research, 1kx, Meltem Demirors, Pantera Capital, Tomahawk.VC, etc.
Current Status
In the first ten days after the launch of TVL, Liquity reached $1 billion. At the time of writing, Liquity was in the top 10 in terms of TVL at https://defipulse.com. Despite a strong product offering and an impressive lineup of venture capitalists backing it, Liquity is still out of the top 100 on CoinmarketCap.
Mina Protocol
What is Mina Protocol?
Mina positions itself as the lightest blockchain. It is immutable and is only 22 KB in weight. This is in stark contrast to other blockchains, since Bitcoin’s blockchain weighs over 300 GB, while Ethereum is approaching 1 TB in volume. Instead of verifying the data of the entire network from the outset, participants of Mina use zero knowledge proofs (zk-SNARK). The nodes only store the proof, not all of the network data. Proof-of-Stake is used as a consensus mechanism.
The smart contracts in Mina are called Snapps. Logic and data are computed off-chain and validated on-chain, making Snapps easy to scale and be efficient and cost effective for large computations. Fees for transactions in Mina are negligible. Transactions are confirmed at an average of 0.2 seconds.
In theory, Mina’s technology solves the famous blockchain trilemma, which states that scalability, security, and decentralization cannot be solved simultaneously.
In practice, the technology is still crude. Users complain about errors, and a full blockchain weighing hundreds of gigabytes is still needed as a safety net. The lightweight 22 KB blockchain is just a snapshot of the whole thing. In case of technical problems, it may be necessary to restore it from the full blockchain. The archive nodes are responsible for storing the complete blockchain, and they store it in Google Cloud…
Team
Founders:
— Evan Shapiro — CEO, previously worked at Mozilla.
— Izaak Meckler — CTO, formerly from Jane Street Capital.
Investors
The project raised $29.4 million from three dozen well-known investors, including NGC Ventures, Fenbushi Capital, Three Arrows Capital, Coinbase Ventures, Paradigm, etc. During the ICO on Coinlist, A total of $48 million worth of Mina tokens have been sold.
Current Status
The mainnet was launched in March, but the technology is still far from ideal, since there is no ecosystem and even wallets with support for Mina are few and far between.
Since the ICO, the cost of the Mina token has fallen by several times and may fall even further. In the next few years, inflation may reach three-digit values, taking into account vesting. But if the project is successful, the capitalization of Mina can easily grow multifold.
Polkamarkets
What is Polkamarkets?
Polkamarkets is a prediction marketplace built on Polkadot. It allows users to place bets on certain events in the future, such as sports matches, election results, events in the financial markets. Competitors include Augur, Gnosis, and Polymarket.
The POLK token will be used as a reward and for paying commissions. The emission is set at 100 million tokens. There are just over 40% of this volume currently in free circulation.
Team
Founders are from Portugal:
— Ricardo Marques — CEO, former developer and founder of Hirefox.
— Francisco Lourenço — CMO, formerly involved in partnerships in the BEPRO Network crypto project.
— Rui Teixeira — Co-Founder and CEO of BEPRO Network.
Investors
The project raised $625,000 from Moonrock Capital, Morningstar Ventures, NGC Ventures, Astronaut Capital, and Spark Digital Capital.
Current Status
As of August of 2021, there is little prediction market volume in the DeFi sector, and there is no clear leader. Polkamarkets does not have a full white paper, only a succint presentation. The MVP was launched in April. The main reason to pay attention to the project is because of the investments it received from several prominent venture capital funds.
Rarible
What is Rarible?
Rarible is a marketplace for creating, buying and selling NFTs like art objects, game items, etc. The project is often cited in the news. For example, Twitter organized the sale of its NFTs through Rarible.
The native RARI token is used for governance, moderation, supervision and payment of commissions. The token has no limit on emissions. 75 thousand RARI are minted per week, which is about 4 million new tokens per year. As of August of 2021, 25 million tokens have been issued, of which 4.5 million are in free circulation.
Team
Rarible founders have relevant experience:
— Alexei Falin — CEO, former founder of Sticker.Place.
— Alexander Salnikov — CPO, participated in several crypto projects in the past.
Investors
The project raised $16 million from several prominent funds like Coinbase Ventures, ParaFi Capital, Venrock, CoinFund, and 01A.
Current Status
About 2 million unique users visit rarible.com every month. This is 4 times less than the number visiting the more popular OpenSea marketplace, but much more than any of the other competitors, and on par with Foundation.
In terms of revenue, the situation may be different, since last fall, Rarible showed a higher trading volume than OpenSea.
Raze Network
What is Raze Network?
The Raze Network is a cross-chain protocol based on the Substrate framework (Polkadot) for providing end-to-end anonymity between DeFi applications. With Raze, private transactions are possible between any blockchain.
Private transaction solutions have been around for a long time (ZCash, Quorum ZSL, Nightfall 3), but they have their drawbacks: — A trusted setup requires a valid certificate made by a third party. — High proof generation costs. — Lack of interoperability.
Raze claims to have solved these problems. The protocol is based on its own zero-resolution proof protocol called Efficient Sigma Bullets. Interoperability with other blockchains is provided through Raze Swap and its own cross-chain bridge.
The RAZE token is used for governance and as a means of reward and exchange, and has an emission limit of 120 million. About 30% of all tokens are in free circulation.
Team
Most of the team remains anonymous. Key people:
— Justin Kellison — CEO and probably a developer.
— Ryuhei Matsuda — a developer and possibly a co-founder.
Investors
The project raised $2.2 million from two dozen funds, including Signum Capital, AU21 Capital, CMS Holdings, Spark Digital Capital, Master Ventures, PNYX, Moonwhale, Flurry Capital, OKEx Block Dream Fund, Tenzor Capital, Lotus Capital, Arpa Labs, X21 Digital, Illusionist Group, AngelONE, GAINS Associate, Evangelion Capital, and Kyros Ventures.
Current Status
The testnet was launched on July 22nd. The launch of the mainnet is scheduled for Q3 of 2021. Interoperability with other protocols will not be available until Q4 of 2021. The project looks attractive in large part thanks to an impressive whitepaper, the solid technology backing, and many well-known investors on board.
Reef Finance
What is Reef Finance?
Reef Finance is positioning itself as a smart liquidity aggregator and yield engine that any financial hub can integrate into. Liquidity is aggregated from DEXs, CEXs, liquidity pools and other sources. The project is built on the Polkadot Substrate framework and is compatible with Ethereum, Avalanche, Cosmos and the Binance Smart Chain.
The three main components of the platform are:
— Liquidity aggregator;
— Smart farming aggregator;
— Intelligent asset management.
The native REEF token is used for both transactions and governance. The token is available on the Polkadot network, Ethereum and the BSC. The max supply of REEF is limited to 20 billion tokens, of which about 13 billion are on the market.
Team
— Denko Mancheski — Founder and CEO, former CTO of Viewly and Adel projects.
— Valeria Kholostenko — CMO, former employee of ConsenSys and co-founder of Polkadot DeFi Alliance.
Investors
The project raised $24 million during its ICO. Among the investors are Alameda Research, NGC Ventures, Genesis Block, Master Ventures, Woodstock Fund, Krypital Group, and AU21 Capital.
Current Status
As of August of 2021, the mainnet is launched in canary mode (for a small number of users). The chats are flooded with users who are tired of waiting, and the price of the token has been moving south since the start of trading. However, the project has a large and very active community.
Solrise
What is Solrise?
Solrise Finance is a decentralized and trustless asset management platform built on Solana. It is designed for both professional managers and retail investors. The latter are promised returns at the hedge fund level. The minimum entry threshold is $20.
During the first testnet competition, Solrise DAWN, some managers achieved returns numbering several thousand percent.
The SLRS token gives the right to participate in project management. The max supply is capped at 1 billion tokens. As of August of 2021, 4% of tokens are in circulation.
Team
The team consists mainly of Serbs. The key members met over 10 years ago in Counter-Strike and have created projects on Ethereum, Cosmos, Polkadot, Near, Hyperledger, Kava and Terra over the last 5 years.
Founders:
— Vidor Gencel — CEO, worked as a developer in the past. Holds a degree in Computer Science and has founded several blockchain projects. Has many years of experience in crypto.
— Filip Dragoslavic — Bizdev, formerly worked for Eligma, a fintech company.
— Matthew Martin — COO / CPO, previously worked with Filip Dragoslavic.
Investors
The project raised $3.4 million from some big names in the business, like Alameda Research, ParaFi Capital, SkyVision Capital, CMS Capital, Jump Capital, Reciprocal Ventures, Delphi Capital, and DeFi Alliance.
Current Status
The Solrise DAWN testnet competition ended in July. As of the early August of 2021, the launch date for the mainnet has not yet been announced.
