Algorand DeFi - The 3 Pillars

Algorand DeFi

Algorand DeFi - The 3 Pillars

Last Reviewed: December 2022

The Algorand DeFi ecosystem is sustained and bolstered by the three DeFi Pillars of Algorand. Fundamentally, it's about assuring the sustainable growth of the ecosystem in the long-term, which is why the Algorand Foundation have invested heavily in supporting the main actors of each 'pillar'. In this article we cover the 3 most important DeFi projects on Algorand.

The 3 Algorand DeFi Pillars are defined by the the Algorand Foundations in Aeneas Program, which goal is to set the base for a flourishing Algorand DeFi ecosystem. The pillars and their main contributors are the following:

  1. Robust Bridges for Newcomers - Algomint

  2. Automated Market Maker DEXs for Traders & Merchants - Tinyman

  3. Borrowing & Lending Platform for Capital & Commerce - AlgoFi

I have covered all of these three actors in depth in previous articles. You can access the articles by pressing on their respective name or by browsing the Algorand Guides section. If you're a beginner to Algorand I'd suggest you to check out the Algodaddy Guide For Beginners or just browse around on the site. You'd be surprised at how much there is to learn!

💡Pro Tip 💡
You'll need to have an Algorand Wallet installed on your phone in order to engage with the Algorand DeFi ecosystem (including Tinyman, AlgoFi and Algomint). Check out the AlgoDaddy Pera Algo Wallet Guide to read more about it and learn how to set it up.


Algorand DeFi - Algomint

1. Algomint
Website - Algomint

Algorands protocol offers swift transactions, high security, and low fees. This is something a lot more than most other blockchains can claim. Luckily, it turns out Algorand can offer other cryptocurrencies these same benefits. Thanks to Algomint other cryptocurrencies or blockchain assets can now be minted onto the Algorand blockchain. Thus, they'd be enjoying the same benefits of swiftness, high security and low fees just as Algorand or any other ASA would. 

What this achieves is that it allows those invested in other cryptocurrencies to easily bridge into the Algorand ecosystem, with a smooth and fluid transaction. They get to test the ecosystem and technology out, without necessarily having to instantly invest in Algorand itself. 

In addition, Algomint allows for great inflow of capital and equity into the Algorand network, which further potentiates the growth of the ecosystem (it's a a simplified but in many cases true equation where money => growth).

Also, can you imagen green BTC? Bitcoin mining is in large unsustainable, especially with current electricity prices. But instead, imagen BTC having a transaction cost of mere $0.001 ALGO, a transaction speed of 4.5. seconds, and instant transaction finality - as well as being carbon-negative. That's exactly what goBTC does. 

Tinyman Algorand
The Tinyman application on Algorand

2. Tinyman

Tinyman is the first decentralized exchange (DEX) created for ASA tokens on Algorand. It launched on 7th of October 2021. They've excelled at what they do and delivered an all around great application (apart from a bit of a hiccup in beginning). The Tinyman launch definitely lead to a more accessible ecosystem and a more engaged Algorand community overall. 

It's without a doubt that Tinyman is one of the most important tools in the Algorands ecosystemIt allows liquidity pools to be formed between Algorand and different ASAs, or even between the ASAs themselves. As a result you don't really need a token to be listed on an exchange in order to trade it.

In addition, users and developers can set up their own liquidity pools for token pairs previously not existing. Not only that, but all of this is provided by Algorands underlying secure, cheap and fast protocol. Due to this, those using the Algorand blockchain were now able to freely trade the popular Algorand tokens (HDL, DEFLY, USDC and others) as well as bolstering the creations of community tokens, some which rose in popularity very quickly (for example the Akita Inu Token).

AlgoFi Algorand

3. AlgoFi
Website - AlgoFi

AlgoFi was one of the most anticipated additions to the Algorand ecosystem of 2021. It have had a similar impact to what Tinyman have had on the Algorand ecosystem, but of course in it's own unique way. It is the first borrowing and lending platform on Algorand. Additionally it provides an Algorand-native stable coin, known as STBL

AlgoFi went live on the Algorand mainnet December 17th 2021 after several months on the test-net. It was audited by Runtime Verification for security purposes. Tinyman raised over $2.8 million USD before launch, having financial backing from Arrington XRP Capital, Union Square Ventures, and others. It was founded by Owen Colegrove & John Clarke.

In the future AlgoFi is planning to offer more classical banking services, such as credit cards and savings accounts, which would be powered through Algorands rapidly growing ecosystem. 

Lending is especially important for the Algorand ecosystem, as it allows leveraging of investment and accessibility of funds to key-players and everyday users alike. Thus you can potentiate your investments, or contribute to the TVL by lending your Algorand on AlgoFi. 
During 2022 a fresh contestant showed up, namely 
Folks Finance, which turned out to be AlgoFi's top rival in the Algorand lending game at the moment.

💡 Algorand DeFi Utility💡
Learn more about the vast ecosystem of Algorand over in this article, where I have listed most of the available Algorand apps, networks, games and other utilities. 


Algorand DeFi - Final Thoughts

Hopefully by now you understand why these 3 players are so important for Algorand DeFi. They're here to bootstrap the growth of the Algorand DeFi ecosystem and the Algorand Foundation have worked hard to support their development. As the ecosystem grows each 'pillar' will be filled with more contenders, which results in further possibilities for the end-users. Some have already started to pop up (like Folks Finance, as mentioned previously). The next couple years shines at us brightly, as the foundation keeps enabling expansion in all corners of the ecosystem. 

If you enjoy this article then please consider buying me a coffee to help support future articles with informative content about the Algorand and it's ecosystem. 

Article Author: Martin
Follow on Twitter: AlgoDaddy