Equally 2020 comes to a close, information technology's a skilful time to reflect on the biggest crypto developments and the wild ride the sector took investors on.

At the beginning of the twelvemonth, Bitcoin (BTC) was hovering just above $7,000, and the superlative-ranked digital asset had started to gather steam as the cake reward halving approached. And so came the coronavirus pandemic and a sharp correction in the global stock markets that triggered the infamous Black Th Bitcoin crash, which saw the toll of BTC collapse to $iii,782 on March 12.

While things looked gloomy for Bitcoin and the greater global financial ecosystem, the decentralized finance sector was just beginning to heat upward.

An emerging moving ridge of DeFi protocols took previously glitchy and difficult-to-navigate decentralized apps and exchanges, such every bit EtherDelta, and transformed them into loftier-volume, high-yield unicorns that provided investors with consistently high returns on a regular basis. In terms of total value locked (the value of the assets committed to the protocol), transaction volume and market capitalization, many DeFi platforms and their associated tokens now rival the acme centralized exchanges.

Source: defipulse.com

In 2020, the decentralized ethos of cryptocurrency truly established itself, and decentralized, peer-to-peer trading within smart contracts has evolved to the extent that a new ecosystem of unique passive income-generating projects tin be hands accessed by any investor with a MetaMask wallet and a few dollars worth of BTC, Ether (ETH) or Tether (USDT).

In addition to earning high returns on DeFi tokens, investors were also able to engage in a new grade of staking that entails offering ane's assets as collateral to small crypto and blockchain startups in return for newly minted tokens. Ordinarily, the tokens would immediately proceeds considerable value and provide yield to the stakers, or farmers. This phenomenon of "yield farming" got started with the release of Compound'due south COMP in June.

The yield farming trend symbolized the radical nature of the DeFi space. Some projects were conspicuously designed to fatten the wallets of their creators by taking advantage of the FOMO and naiveté that is feature of many new investors in emerging markets like crypto. For example, a common farming mechanism requires users to buy a number of existing tokens before obtaining yield. Due to the immense inflation pressure early on, yield farmers often dominate the token'due south price action and are themselves the source of the yield they are chasing.

Withal, a number of top-notch DeFi projects emerged and gained prominence thanks to yield farming. To date, they go on to grow their communities and offer revolutionary new fiscal concepts that could change the face up of crypto and traditional finance.

Uniswap: One DEX to rule them all

It can exist argued that of all the projects that gained prominence in 2020, Uniswap was i of the foundational players in catalyzing the DeFi boom. The platform provided a new ecosystem where anyone could create and list a token on the Ethereum blockchain without needing to pay list fees to exchanges or participating in an exchange incubation program.

While Uniswap was launched in 2018 and showed consistent growth throughout its life, in 2020, it reached heights that few could take predicted. From averaging less than $ane million in daily book in the kickoff one-half of the year, the protocol accrued billions in liquidity in the "summertime of DeFi" and peaked at almost $one billion in volume. Fifty-fifty though DeFi excitement subsided since, Uniswap book figures consistently claiming some of the more established centralized exchanges.

Source: defipulse.com

In a throwback to the ICO days of 2017, Uniswap revealed the UNI governance token on Sept. xvi and airdropped 400 UNI tokens to every wallet that had interacted with the protocol. This "DeFi stimulus cheque" — as it came to be chosen due to initially being valued at around $1,200 — triggered a new bout of excitement and hype around the project that briefly drove the price of UNI upwardly to $eight.39, equating to an airdropped value of more than than $3,300.

Yearn.finance masters yield farming

As opportunities to earn yield on crypto assets multiplied in DeFi, aggregation services became e'er more necessary for average users to optimize their profits.

Yearn.finance and its YFI governance token emerged as the aureate standard in the infinite, as the squad combined the all-time features of smart contracts and the traditional financial organisation to create a unique ecosystem of services that are essential to investors.

Early data shows that the YFI token was trading at a price of $790 on July 17, but as traders took note of the projection, YFI caught fire and, at one point, saw its token price surpass $43,000.

Source: defipulse.com

Yearn.finance is perhaps the biggest success story of the summer, as its cursory yield farming distribution created a tight, decentralized and professional person community of developers and users. The project eventually hammered out an unabridged DeFi conglomerate by merging with a host of other protocols from other niches.

The squad continues to deliver new and innovative products at a breakneck pace while remaining a grassroots and decentralized community.

Aave's beauteous consistency

Aave is another huge DeFi success story from 2020. Formerly known as ETHLend, Aave was founded with the simple premise of creating a decentralized finance protocol that allows people to lend and borrow crypto.

Aave initially launched as office of the ICO craze of 2017 and survived the crypto winter despite numerous challenges. Since its launch, the project has gone through several protocol changes and a token swap to emerge every bit one of the top DeFi contenders.

At the starting time of the yr, Lend was trading at $0.02 (equivalent to a value of $2 with the current AAVE token) with a 24-hour volume of $10.6 meg. Since that fourth dimension, the cost has exploded to reach a peak at $95 and a 24-hour trading book near $222 million.

According to DeFi Pulse, Aave is the fourth-ranking DeFi platform by value locked with a electric current value of $1.73 billion supplied by its users.

Source: defipulse.com

Throughout the twelvemonth, Aave was the trailblazer for innovative features in the DeFi lending infinite. It was the showtime to deliver synthetic forms of collateral from commutation pool tokens; it released an under-collateralized borrowing machinery; and it introduced many user experience improvements with its V2 platform and the AAVE token.

SushiSwap shows imitation is even so the greatest form of flattery

Crypto wouldn't exist "crypto" without a good fork saga, and SushiSwap'southward vampire attack on Uniswap is probably i of the most dramatic events of the year.

SushiSwap started by reusing Uniswap's code and hatching a perfidious plan: It would but accept Uniswap pool tokens for yield farming, and at the stop of the farming period, it would automatically redeem them and pocket the underlying liquidity for itself. The platform's SUSHI governance token was designed to alter and control the associated decentralized democratic organisation, or DAO. Still, the yields involved in farming the token remained the strongest attraction.

A combination of strong popularity and exchange listings propelled SUSHI to heights of $15 after starting from $0.15, attracting more than $one billion in yield farming upper-case letter. The ploy was just partially successful at stealing Uniswap'south liquidity as its total value locked rose in lockstep with SushiSwap's, showing that existing Uniswap liquidity providers were unwilling to make the jump.

In a dramatic twist of events, the project's atomic number 82 developer, Chef Nomi, abruptly sold about $fourteen meg worth of SUSHI tokens and appear that he was stepping abroad from the project. SushiSwap users immediately interpreted this maneuver every bit a rug pull — or exit scam — and the protocol'due south TVL plummeted as the toll of its governance token dropped below $one.

Eventually, the uproar from the customs convinced Chef Nomi to return the $14 meg in Ether gained from the SUSHI sale, but the impairment to the token value and the platform'due south epitome was already done.

Despite this scandal, the customs connected building out the platform, and the contempo merger between Yearn.finance and SushiSwap helped restore conviction in the project despite its rocky history.

The platform currently has $i.13 billion of locked liquidity, and the SUSHI token recently reached a swing high above $3.00.

YFII shows that more is not ever better

Similar to Uniswap, Yearn.finance'south YFI token was followed by a multitude of copy-true cat clones seeking to ride on the coattails of the popular DeFi token.

DFI.money (YFII) initially launched equally just a fork or copy-paste clone of Yearn.finance, and the protocol received backfire from many in the DeFi customs, as the project appeared to lack purpose.

Some exchanges such equally Balancer blacklisted the asset due to the fact that it was announced via Medium by a pseudonymous account, while the project appeared to lack any merit beyond being a clone of YFI. Some analysts compared the controversy to the Bitcoin–Bitcoin Greenbacks split, though much less impactful.

An eventual listing on Binance did see YFII's price spike to $8,54, and for a moment, traders viewed the token every bit a cheaper alternative to investing in YFI. Like many other DeFi tokens, YFII's price withered one time a stiff turn a profit-taking correction hitting the DeFi sector, and the team's lack of clear direction and central development has kept the toll pinned below $ii,000.

Currently, YFII trades effectually $one,660 with a 24-hour volume of $86.five million. The total value locked in the protocol currently sits at $3.8 million, and compared to $413.three one thousand thousand locked in YFI, it has failed to achieve virtually the same success as its parent.

Curiously, DFI.money was just the first of many YFI-themed forks — the others were even less successful or legitimate.

The i food craze that combined the worst of DeFi

The summertime of DeFi, as spectacular and consequential for the ecosystem as it was, was still a time of irrational exuberance and excesses, and nowhere is that more axiomatic than in Yam Finance.

The project was amongst the first popular yield farming projects and set the stage for the era of projects named afterward foods, or "food tokens."

Most food tokens were depression-effort forks, often without even proposing any product to speak of beyond yield farming — examples include Tendies and Kimchi.

Yam started out with what seemed like noble intentions. It was a rebasing algorithmic stablecoin functioning similar the more established Ampleforth. Its allure was the "fair launch" through yield farming, seeking to create a DAO customs in a like manner to Yearn.finance.

Yam was i of the pioneers of the "circular pool" concept, where some farmers had to first buy l% of their capital's worth in YAM tokens to receive more than YAM tokens as yield. This, coupled with the fair launch hope, triggered a frenzy of involvement and activity among broad swaths of the community.

The protocol nerveless hundreds of millions in capital letter, but there was one primal flaw: The smart contracts were never tested, much less audited by a professional team of security researchers. While the founders made it articulate, it somehow did not deter the farmers — much to their chagrin.

The developers of the project made one fatal flaw — they forgot to carve up by 10 to the power of 18. Ethereum smart contracts utilise very large integers to stand for decimal values, requiring developers to multiply and divide by this cistron when performing calculations.

The projection's first rebase thus created an enormous number of new coins that all went to its treasury. This made it impossible to accomplish a voting quorum and deadlocked the protocol — the bug became unfixable.

Yam relaunched afterward, but it never reached the same heights of popularity as during its initial phase. The experience serves every bit a stark reminder of how things can go wrong in DeFi.