Blockchain technology is altering all sectors of the world economy with its unlimited opportunities and innovative products. Decentralized finance is one of the sectors that has been trying to shake up the traditional financial ecosystem. The multitude of DeFi applications that are emerging throughout the financial technology space has provided solutions such as lending, staking, derivatives trading, among others.
The current trend is justified, as DeFi attempts to build an alternative to rigid banking systems. In addition, government regulation (or lack thereof) and a flawed financial infrastructure have allowed DeFi’s projects to flourish. However, the DeFi concept has also faced several obstacles, such as liquidity and day-to-day usage problems, which have prevented it from moving into the mainstream financial market. On the other hand, 32% of those who participated in a Bitcoin Formula survey have no idea what DeFi is.
DeFi market capitalization has increased surprisingly in the last months, which indicates the growing interest in the crypt industry area. So, could this be the financial revolution the world has been waiting for?
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DeFi figures don’t lie
The latest statistics from DeFi Pulse indicate that more than $7.7 billion is tied up in the DeFi market, and nearly $4 billion was added to the market capitalization in the last two months. Several DeFi projects and platforms have recorded impressive growth. Compound, a decentralized lending protocol, currently has a market capitalization of $540 million; however, as of mid-June it was only around $100 million.
Token Insight’s Q2 2020 report revealed that DeFi users have more than doubled from 100,000 to 230,000 since January 2020. However, industry experts are concerned that the publicity surrounding these astronomical figures could be temporary as it may be based more on speculation than the application of DeFi product use cases. Johnson Xu, TokenInsight’s head of research, told Cointelegraph:
„In the short term, the high interest rate and liquidity mining mechanism has created a boom in space, which drives the DeFi market directly upward, resulting in a speculative push in the DeFi space. We believe the recent DeFi boom could be short-lived with no further applications or use cases created to accumulate significant value within the space.
Overall, there are a number of factors in the DeFi ecosystem that are contributing to the radical growth of decentralized funding.
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