Crypto Exchange Foundry
Let's look at what DeFi is before we dive into analyzing how decentralized finance (DeFi) became an over $100 billion industry in just a few years.
The term “DeFi” is short for "decentralized finance" and believed to have been first mentioned in August 2019 in a Telegram chat between Ethereum developers Inje Yeo of Set Protocol, Blake Henderson of 0x, and Brendan Forster of Dharma.
DeFi has specific characteristics, such as the fact that cryptocurrency trading software on these distributed networks allows people to control their assets and transfer value from one person to another without using intermediaries such as banks.
These networks are global as well, and this means that there are no borders in the parallel financial system - everyone can simply access it. The code is also open for anyone to see and inspect, which leads to a high level of transparency. It also enables developers to build on top of other applications, which accelerates innovation and allows them to become more advanced.
DeFI protocols are usually built on public blockchains such as Ethereum, and these are the rails to a new financial system run by thousands of nodes, which are computers that run the blockchain software spread across the globe.
When the Coinbase public listing appeared, many analysts were looking for a $100 billion evaluation. The cryptocurrency exchange, founded by Fred Ehrsam and Brian Armstrong, quickly hit that mark. However, Coinbase’s COIN token has settled down to a lower evaluation over time.
Coinbase listed DeFi as a potential competitor when it files for a public listing, but market caps are not quite the only way we can discuss the DeFi market. We need to talk about the value of assets people have deposited in DeFi apps to earn yield.
The all-new “Yield Farming” is a quickly becoming popular way to generate rewards through using cryptocurrency holdings. The banks got that product going, and crypto finance has followed through.
You essentially lock up cryptocurrencies in a pool and get rewards, which can be deposited to other liquidity pools to earn rewards on there, and so on. This can be a never-ending loop if you choose to make it that way, but you would constantly have your cryptocurrencies work for you instead of just stagnating on your crypto balance account.
That measure gives a similar reading, and there is more than $100 billion worth of assets locked up in DeFi.
DeFi has taken off in the Binance Smart Chain (BSC), according to Defistation. The current TVL on there is $38 billion, led by PancakeSwap and includes money markets that fill a similar role to Aave and derivative solutions that serve a similar function to dydx.
DeFi on BSC has grown a lot faster when compared to Ethereum as well, which is quite interesting.
While the 2020 surge is known as the DeFi Summer, it is already evident that the market has grown a lot more since then. The TVL first broke $1 billion in February of 2020, and it broke $10 billion in September on Ethereum. The money market platform known as Compound broke $10 billion in TVL alone throughout the month.
The original DeFi protocol known as the stablecoin minter MakerDAO also managed to break the $10 billion mark for the first time.
1confirmation’s Richard Chen has assembled on-chain data about the users who use Dune analytics.
The chart showed that over 2 million wallets have interacted with DeFi protocols. It could mean that 2 million individuals have been interacting with DeFi, but this is difficult to confirm.
Keep in mind that many individuals have participated in DeFi through a third party, so while some users could potentially hold multiple wallets, we cannot ignore that some wallets could represent many users.
Even if we do not yet know the real count of users, the amount of money that changes hands shows that these applications are a real business.
The site known as CryptoFees has been tracking and comparing the blockchain usage fees charged throughout different DeFi applications, where the top DeFi applications it lists, such as Uniswap, SushiSwap, and Compound, show a seven-day average of collected daily fees ranging from $1 million to $4 million.
DeFi financial products quickly catch up with the banking if we look at the projects and reports on DeFi on Ethereum by blockchain software company Openware, showing a significant market demand for crypto loan software.
Keep in mind that DeFi represents more than just a credible narrative, with a lot more substantive business. It shows products with simple returns and provides a way for people to earn high yields on deposits.
One thing is for sure, though, and this is the fact that DeFi is here to stay and that it is growing popular daily.
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