Cryptocurrency analyst. Founder and editor at btcpeers.com
To be sure, blockchain rose to the world stage on the back of Bitcoin's remarkable performance. However, blockchain technology is gaining its significance, especially after the cryptocurrency ecosystem nearly collapsed in 2018. Today, the technology anchors around three primary use cases: staking, custody, and DeFi.
Decentralized Finance (DeFi) is particularly interesting because of the waves it is making. DeFi protocols such as Compound are taking the world by storm as more people realize how the ecosystem could revolutionize the global financial ecosystem. Just last month, Compound topped MakerDAO as the most valuable DeFi lending project.
Overall, the DeFi ecosystem’s trajectory is steepening upwards as more value is locked in DeFi projects. To put this in context, consider the value locked in DeFi projects in the last 30 days. In the period, the total value locked (TVL) in DeFi jumped 119% to settle at $2.279 billion. If this growth cannot convince one to onboard the DeFi ecosystem, then nothing will.
Source: DeFi Pulse
Admittedly, there is a wave of DeFi protocols, but most are still in the abstract realm. Few protocols such as MakerDAO and Compound have been able to go live and to attract investors. These software pieces are coming up with solutions to problems that have plagued the legacy financial system for ages.
DeFi lending protocols enable users to access credit cheaply. On the other hand, lenders can earn high-interest rates on their investment. Importantly, the majority – if not all – of the DeFi developers agree that the protocols will right most of the ills of centralized finance (CeFi). There is a need for an alternative to traditional finance from the foregoing, one that serves all participants in good faith.DeFi lending protocols are more popular today because they enable everyone to supply cryptocurrencies and stablecoins and to earn interest on them. This another avenue for holders of the digital currencies to earn income other than trading them on exchanges
According to a report, DeFi is the fuel that will propel the financial innovations of the future. The innovations already began with the complete transformation of existing commercial products such as lending. This trustless ecosystem enables finance to reach the unbanked and the under-banked in a previously impossible way.
Grand as the potential of DeFi protocols is, lack of a unified platform to synergize their efficiencies is problematic. One significant advantage of the traditional finance ecosystem – CeFi – is that centralization makes standardization of practices easy. Standardized practices enable service providers to focus more on consumer satisfaction. Logically, it follows that the DeFi ecosystem has an inherent weakness, which is a lack of standardized practices.
Maker, Compound, and other DeFi protocols enable a fairer and more affordable finance ecosystem in which all participants have equal access to financial products. These efforts are bearing fruits, as manifested in the TVL the protocols have amassed over the past few months.
But there is no doubt that the DeFi protocols might fall short of their potential if standardization issues are not dealt with in good time. It is a problem that PlutusDeFi intends to correct. The DeFi ecosystem is expanding fast, and a myriad of projects are emerging to address specific issues. In more than one instance, numerous DeFi projects focus on a single sector.
DeFi Pulse, for instance, lists 10 DeFi protocols that offer lending services where the only standard thing is the Ethereum blockchain platform. Seven protocols, including Balancer and Curve Finance, offer decentralized exchange (DEX) services. Again, all these protocols are on-chain Ethereum solutions.
PlutusDeFi envisions a scenario where all these DeFi solutions are available on a single platform. Demonstrating what it has to offer, PlutusDeFi has already taken a lending solution called Lend & Earn. Lend & Earn aims to aggregate DeFi lending protocols on a single platform for easy access by users. The solution enables users to select the preferable lending protocol based on desired parameters.
Writing on its blog, PlutusDeFi described the lack of a mechanism with which users of a DeFi platform can financially involve themselves with the entire DeFi ecosystem as “DeFi’s biggest elephant in the room.” One of PlutusDeFi’s objectives is to address this issue, and it plans to utilize a native token called PlutusDeFi token (PLT).
Regular DeFi protocols' tokens increase with time. Ultimately, this takes value away from the platform, and the platform ends up worthless in the long-term. To correct this, the supply of PlutusDeFi’s tokens reduces with time. Therefore, the long-term value of the ecosystem grows, which makes the project sustainable. If this were DeFi's only impediment to going mainstream, then PlutusDeFi might have steered the ecosystem in the right direction.
If PlutusDeFi’s vision materializes, then the DeFi ecosystem is likely to witness a massive inflow of new users, both individual and enterprise. Perhaps the vision is what it will take for DeFi protocols to seize the 21st century.
Disclaimer: I have plans to invest in PlutusDeFi, so I can have a vested interest in the project