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DeFi Continues to Evolve: Its Impact on Ethereum Could Be Much Greater Than Considered!

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DeFi Continues to Evolve: Its Impact on Ethereum Could Be Much Greater Than Considered!

Decentralized finance (DeFi) markets have greatly eroded the economic storm this year and continue to mature, although the crypto market remains relatively flat. This new financial environment could have a far greater impact on Ethereum than the ICO boom.

Ethereum is currently the core standard for DeFi, as it is the global standard for smart contracts running secured crypto exchange and export protocols. It is logical then that the growth in this ecosystem points to an increase in Ethereum as it positions itself in the middle of the entire financial situation.

DeFi markets are growing rapidly

According to DeFi Pulse, the total value locked in DeFi markets (TVL) is close to one billion dollars. Although Pandemic dropped TVL to $ 550 million in mid-March, DeFi improved 77%.

TVL (USD) is calculated by taking the total balance of Ether and ERC-20 tokens held by DeFi smart contracts by multiplying their current prices in USD.

Total locked amount in DeFi. Source: DeFi Pulse

In just 18 months, the value locked in DeFi grew by almost 300% in dollars. Naturally, this figure changes with the fall and flow of cryptocurrency prices; however, in the same period, the total crypto money market, which managed only 110%, surpassed the growth.

For Ethereum, the backbone of this new financial ecosystem, 2.5 million ETH is currently locked, representing 2.25% of the entire supply. Maker accounts for almost half of the entire market share and is the dominant force in DeFi with the 2 million locked ETH. Other popular platforms include Synthetic, Compund and Aave, which now distribute their tokens. New platforms appear almost every week.

DeFi reached several milestones in May. While the number of new Defi assets exceeded 1,000 for the first month, the user base reached its all-time high of 200,000.

Evgeny Yurtaev, CEO and founder of the Zerion Defi project, published a chart each month showing that new DeFi assets are growing exponentially and said :

“THE SUPPLY OF INCREASED DEFI ASSETS CAN BE EXPLAINED BY BEN THOMPSON IN THE ‘ADDITION THEORY’. WHAT THE INTERNET DOES TO CONTENT, NOW DEFI IS DOING AGAINST FINANCE. DEFI IS THE NEW FINTECH. ”

He added that decentralized trading, money markets, margin trading, ETFs, options, and futures spread over less than a year as evidence of rapid growth.

Another chart from Dune Analytics shows that DeFi’s user base growth has nearly doubled since the beginning of the year and is about to reach 200,000.

Increase in DeFi users since December 2019. Source: Dune Analytics

Bigger than ICOs

Chris Burniske, partner of venture capital firm Placeholder, said that DeFi will have a far greater impact on Ethereum than ICOs in 2017 and 2018:

“THE ICO BOOM BOOSTED ETHEREUM’S ABILITY TO DELIVER FINANCIAL SERVICES: AN EARLY CAPITAL FORMATION. DEFI WILL INCREASE ETHEREUM’S ABILITY TO PERFORM ALL FINANCIAL SERVICES. ”

ICOs provided an opportunity for crypto projects to raise money in Ethereum through token sales. Although this is relatively small compared to traditional investments,   Ethereum exceeded $ 1,400 in January 2018.

Unfortunately, very little came out of most of the tokens offered as “products.” In addition, there were many ‘hype’ that caused the pump and dump scenario that almost every altcoin was exposed to in the six months from the 4th quarter of 2017 to the 1st quarter of 2018. In mid 2018, unsuccessful crypto projects started leaving Ethereum; There was a 94% price drop that year.

When we arrive in 2020, the activity on the chain is too high for Ethereum. However, prices have not yet attempted to recover. Meanwhile, DeFi grew naturally impressively, without any excess in previous years.

Trader and analyst “Cactus” (@CryptoCactus) observed that this growth will continue and show more impact than 2017:

“PROBABLY THE COMBINATION OF ETH 2.0 AND THE CONTINUED GROWTH OF DEFI WILL LEAD TO A HIGHER CAPITAL FLOW OVER THE NEXT 2 YEARS OVER A 3-MONTH PERIOD COMPARED TO 2017. THE ICO EXPLOSION WILL CHANGE WITH SOMETHING ELSE. ”

Burniske said, “The crypto is still far from a 2017-style interest; he said, however, that interest would return. While each cycle reinforces previous narratives; He said it will lead to new narratives that transform users, suppliers, developers and investors. ”

Stock markets on the decline, DeFi sound

DeFii expert Ryan Sean Adams compared the stock market in the latest edition of the Bankless newsletter. He stated that stock exchanges behave like capital assets and have become savings accounts for their assets. Stocks are currently based on Fed’s actions and efforts to artificially inflate the market by printing more money.

Adams added that DeFi was already in 2017, but was then called ICO. DeFi has matured in various ways since these intense speculation days.

DeFi is now a complete financial ecosystem rather than a speculator choice. It can perform various transactions such as payment, lending, borrowing, savings, trade, investment, earnings, management, hedging and margin trading.

Economic bandwidth, stablecoins and ERC-20 tokens built on Ethereum are over $ 7 billion and growing. Live exchanges can now process thousands of transactions per second as a transaction scale. Adams said:

“STOCKS CREATE CASH FLOWS BUILT INTO THE LEGAL SYSTEM, BUT THE CASH FLOWS OF THESE DEFI ASSETS ARE PLACED IN THE CHAIN. NOW, WE UNLOCK DEFI ASSETS BY UNLOCKING NEW GROWTH AND GOVERNANCE MECHANISMS. ”

He added that the shares are now “drunk” and that the best capital assets of the 2020s will be sold on Uniswap, not Nasdaq.

DeFi has definitely come a long way in the past few years and is just beginning. Central bank-style economies should have been a lesson for everyone; however, with the monetary expansion, it becomes clear that no lesson was learned from this. Finance must be decentralized and DeFi does exactly that.

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