Trends in Decentralized Finance (DeFi)

5 Decentralized Finance Trends Worth Watching for:

Many themes and trends have emerged within the DeFi movement. We’ll show you 5 trends to watch for in the coming months and beyond:

1. Ethereum Continues to Lead

The Ethereum blockchain continues to dominate the DeFi landscape despite losing some market share to other DeFi platforms and smart contracts (including Tron, Binance Chain, Neo, Waves, and others). All major DeFi protocols , except for the Bitcoin Lightning Network, are based on the Ethereum blockchain, with new projects coming together all the time. Even with ETH volatility, the long-term uptrend in TVL on DeFi is intact. The ETH locked in DeFi possibly a large measure of adoption as it indicates that the proportion of all ETH used to DeFi instead volatile USD equivalent, is at about 80% of its historical peak.

Ethereum analytics firm Covalent forecasts a “turnaround” event , in which DeFi transactions outperform simple ETH transfers.

Finally, thanks to the composability of the Ethereum blockchain and the Maker Protocol , new solutions built on top of both make the DeFi ecosystem incredibly valuable. Compositing capacity helps create a “network effect”, a powerful phenomenon in which the value of goods or services increases as the number of users increases. It is due to the network effect that the Maker Protocol accounts for more than 50% of TVL in DeFi. To date, more than 600 projects have integrated Dai by Maker into their applications built on the Protocol.

2. Increase in Interest on Stablecoins

There is a huge and growing appetite for stablecoins as traders look to ‘on-chain’ (crypto) ways to hedge and store value. Tether (USDT), a centralized stablecoin with the majority of its supply hosted on Ethereum , maintains its multi-million dollar dominance. But other centralized and trust fund-backed alternatives are gaining traction, all taking the form of ERC20 tokens:

Circle’s USD Coin

The Trust Token, TrueUSD

Paxos Standard

Gemini dollars

While the Ethereum blockchain itself is decentralized, and all of these tokens can be openly transferred and traded, they are centralized in how they store value. Because they are managed by organizations that hold the funds that back them up in one or more bank accounts, their value can be frozen or even confiscated. Simply using a decentralized infrastructure does not eliminate all single points of failure.

The Stablecoin Dai is different. Dai is impartial, available to anyone, anywhere and is not caged by the parameters of a central entity. While there is considerable interest in centralized stablecoins, Dai is the most decentralized stablecoin and the most popular stablecoin in the DeFi space. Thanks to its open nature, stability, and resistance to censorship, Dai has also gained popularity in Latin America as a tool to survive hyperinflation.

3. New Innovative Products

Dai allows anyone to access the stability of the US dollar (something that is not always easy for those outside the US) and deploys it throughout the world of DeFi. At one end of the spectrum, this includes simple services like fast, low-cost international transfers (Dai is ideal for remittances) . At the other end of the spectrum, Dai has integrated into more complex products, including:

Insurance (eg Nexus Mutual )

Market Predictions (eg Augur and others)

Decentralized Leveraged Trading (eg dYdX )

Loan protocols (eg Compound , Aave , InstadApp and more)

Synthetic Assets (eg UMA )

All of the above allows users to access products that would otherwise be out of reach. The DeFi space is sure to welcome more and more novel and experimental projects in the months and years to come.

4. DeFi “Loans” in Focus

“Decentralized Lending Protocols” are a new sector in the DeFi space, although it is not like asking for an unsecured loan in the conventional financial world. DeFi “borrowers” don’t sign stacks of documents to guarantee repayment, but instead place crypto collateral via smart contracts on the blockchain. This allows them to free up cash for day-to-day expenses or trading, without selling the cryptos whose value they believe will appreciate. This area of ​​DeFi is increasing in popularity.

5. Exchanges in Evolution

Exchanges go beyond the paradigm of separate services, purely centralized or decentralized, with new platforms that include the best of both paradigms.

Aggregators, services that link traders with different DEX (Decentralized Exchange), offer easy access to liquidity from multiple sources at the same time. Peer-to-Contract (P2C or user-to-contract in Spanish) platforms, such as Uniswap, complement the traditional Peer-to-Peer (P2P or peer-to-peer) approach. In the P2C model, users buy and sell from a smart contract that automatically calculates the price based on supply and demand. This eliminates the need for order books, reduces complexity, and simplifies the user experience.

In addition, exchanges are integrating other services, so that users can acquire cryptocurrencies and then use them immediately. In December 2019, an update to the 0x protocol of the decentralized exchange infrastructure allowed the investment of ZRX tokens . The Kyber liquidity aggregation protocol now does the same. And offers a unified DeFi hub , providing an easy-to-use interface for users to generate Dai and exchange it for other tokens on the embedded DEX, or acquire Dai on the DEX and earn interest locking it on the Interest Rate. Dai (DSR).

Meanwhile, centralized exchanges are integrating decentralized protocols. Coinbase Wallet offers users access to Compound (loans) and dYdX (margin trading), and OKEx has integrated Dai Interest Rate (DSR) . All of this points to greater convergence and understanding, as centralized services facilitate access to decentralized opportunities.



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