DeFi is on the cusp of mass adoption | Author: Titus | Capital | June 2021
Decentralized finance has already left its mark on the crypto market. A year ago, the assets under the management of the DeFi agreement were approximately US$1 billion, but the total value locked in now has increased to 60 times. Despite some troubles, the young market has quickly become an important part of the crypto space due to innovative financial products and passive sources of income, and is just beginning to show its potential.
Therefore, the success story of the DeFi protocol can be explained by the relatively high return potential. According to the report, decentralized exchanges achieved an average return of 46 times, while liquidity aggregators provided 22 times of capital growth. The liquidity in the market is also high due to mortgage quotes.The automation of financial products through smart contracts also increases capital effectivenessSince no middlemen are involved, not only does it require no expense, but ultimately it also does not require personnel costs.
The report predicts the prosperous future of DeFi market. It is not just the “pursuit of return” in the crypto market that will further increase the demand for DeFi products.Interest in traditional finance is also growing departmentThis overlap will be reflected in “code control and democratized asset management solutions running on decentralized systems.” Especially the integration of stablecoins will be very important in the future.
Ensuring that users truly participate in the project and transform into a real community is the key. The release of reliable tokens, economic models, and incentives is very important to ensure that users care about and are loyal to their careers.
In this way, DeFi is becoming more and more attractive to institutional investors who have so far been popular in the market.
Institutional investors’ acceptance of DeFi is limited but more and more, but because cryptocurrency companies not only provide attractive returns to private customers through exposure to DeFi, institutional investors will not react as they did to Bitcoin.
The key is still the Ethereum blockchain, which is by far the largest smart contract transfer point and the leading network “in terms of assets, developer activities, and users.” As layer 2 solutions are increasingly established, Ethereum is controlling its expansion deficit. Nevertheless, “living and evolving ecosystems” such as Solana or Polkadot are also seeking growth.
Thanks to its ability to attract new capital, DeFi will become a battleground for leading exchanges. Since the returns of traditional finance are close to zero, cryptocurrencies will flourish due to their ability to generate attractive returns for liquidity providers.
Overall, the report proves that the market is becoming more and more professional. Regulatory themes will play an important role in the future, especially in connecting professional investors. However, this is not mainly about legal innovation brakes, but about protecting investors.
Regulation is a key challenge because DeFi has not really received the attention of regulators, but the initial proposal indicated that when they are unable to enforce the supervision of DeFi companies due to the decentralized nature of DeFi companies, they hope to find a way to allow users and Investors take responsibility. Pure technology platform.
Since regulation and protection can be embedded in audited code and functions, there may be a paradigm shift in regulation and consumer protection. Self-discipline can develop and become the new normal,
However, before DeFi can fully self-regulate, a lot of training funds must be invested Paid.
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