Decentralized finance is creating a lot of buzz in 2020, especially given the unexpected consequences of this year’s COVID-19 pandemic, 2020 has become something of a mess in terms of traditional finance.
As Q4 approaches, the growth of DeFi (decentralized finance) has opened a new world of opportunities for progressive investors and digital assets holders to earn interest and participate in the industry’s new innovations.
To date, the market has surged to over $15 billion (more than what was raised in 2017-18's ICO craze) with $6.73 billion in Total Locked Value in various DeFi products. What started as an experimental and often confusing segment of the blockchain industry is now the industry’s most popular. This is largely due to the transparency of products that are producing income-earning opportunities for those that take the chance to fund, stake, lend, and even borrow.
According to DeFi project tracker DeFi Pulse, there are well over 100 recognized DeFi projects, with dozens more popping up every week. With all of this activity, it is important to stop and recognize what is occurring and the potential impact that this movement will make. Below are three trends that are currently active in the DeFi market.
1. Liquidity Bridge Solutions
With over $22 billion dollars in staked digital assets, there is a massive opportunity to leverage this locked capital for new opportunities. The problem is that staked assets can be scattered across many different blockchains, but most DeFI and investment opportunities are still predominantly on the Ethereum blockchain. This creates the necessity for a liquidity bridge that can connect various assets without the need of converting or buying new ERC20 assets in order to participate.
One company, RAMP DEFI, is bridging this gap between staked assets and liquid assets by providing a cross-chain liquidity bridge solution. Using RAMP’s technology, users can extract liquid capital from their staked portfolio by collateralizing their assets into a stablecoin - while retaining ownership of their staked portfolio along with the staking rewards.
RAMP has created a comprehensive economic design for cross-chain liquidity transfer, so users can be sure assets are secure and accessible. As more blockchains emerge, liquidity bridges will be a critical part of scaling the ecosystem and making DeFi products more convenient for the average user. This convenience is ultimately what will help make DeFi mainstream.
2. Greater Interest In Digital Assets
As the fiat monetary system continues to prove unstable, there’s a general shift of interest towards digital assets. What started out as a small alternative to fiat money has quickly become an explosive investment opportunity, with interest in cryptocurrencies growing dramatically in the past ten years. DeFi is at the core of this as it is attracting traditional and institutional investors that can relate to the interest-bearing products being brought to market currently.
By 2030, experts expect to continue seeing massive growth in cryptocurrencies and blockchain solutions. This year’s events have sparked an unexpected (but welcome) interest in digital assets, with everyday people looking into how to better secure their money in times of financial downturn or crisis. DeFi and its convenient use of stablecoins has provided an outlet for investors that want to hold stable digital assets, while still achieving some kind of capital appreciation.
Will this mean that cryptocurrency and blockchain will play a vital role in the financial systems of our society? Only time will tell. What we do know is that cryptocurrencies and blockchain technology are here to stay and for good reason.
3. Financial Inclusion
Decentralized finance may be able to offer something fiat currency has struggled to achieve: inclusion. There are millions of people all over the world that don’t have access to a bank account, let alone investment opportunities. Digital currencies are far more accessible, and, hopefully, more universal in the future. They transcend national barriers and financial restrictions, offering a more inclusive financial environment.
The more people that participate in an economy, the better. Being inclusive is difficult when you’ve got a centralized fiat currency. As the interest in cryptocurrency and blockchain continues to grow, we’ll likely see more and more people getting involved and staking assets in the market.