Since its emergence, decentralized finance, also known as DeFi, has experienced surprising growth, especially in the last year, thanks to its ability to generate large returns and profits, albeit with great risks.
Decentralized Finance, decentralized finance or DeFi, is a term that is becoming increasingly important within the global financial ecosystem. Developed on the technology blockchain, and mostly on the network of EthereumDeFi is a revolutionary innovation that allows anyone to access loans and other financial services in a decentralized manner and without intermediaries, in addition to generating large rewards for providing liquidity in several of the protocols of this wonderful ecosystem.
To date, DeFi has a Total Value Locked (TVL) of $11,3 billion, according to DeFiPulse, deposited by users of these protocols, such as Aave, Compound, MakerDAO, and the most popular and well-known of all Uniswap.
Source: DeFi Pulse
As shown in the graph, the growth of decentralized finance in the last year has been exponential, since this finance model allows easy access to anyone who wants to use these protocols, digital assets, smart contracts and decentralized applications (dApps) without the need to be banked, which represents a growing advantage for those who wish to directly access loans, investments, liquidity, and other financial services without complications or intermediaries.
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Uniswap, the leading DeFi protocol
At the end of October, the decentralized finance (DeFi) market reached a new all-time high of $12,4 billion in TVL, with the most dominant protocol being Uniswap, which at press time holds over $2,74 billion, with 24,2% dominance of the sector. Although DeFi TVL currently stands at $11,3 billion, down 8,8% from its all-time high, the growth of this market is still astounding.
In the last 3 months, DeFi has grown by more than 140%, going from a TVL of 4,54 billion to the 11,3 billion that the market currently holds.
The popularity of DeFi
In an increasingly digital world, surrounded by technological developments, decentralized finance is presented as a viable alternative solution to the complications and problems related to the traditional financial system, which is highly centralized and regulated by third parties. DeFi presents viable solutions to problems that the traditional financial sector cannot solve.
One of the key factors behind their popularity and growth has been decentralized exchanges, known as DEXs, which allow the same functions as well-known cryptocurrency and digital asset exchanges, but without the control of any trusted third party. DEXs allow the exchange, transfer, deposit and withdrawal of digital assets, among other functions and services, thanks to their platforms built and managed directly from a blockchain network.
In July, Ethhub co-founder, Anthony Sassano, he pointed the prominent growth of these ecosystems, highlighting that in just 2 days DeFi achieved a growth that the first time took more than 18 months.
“To put this into perspective, there was $3B locked in DeFi just 2 days ago, meaning $400M has entered the system since then – it took DeFi ~18 months to go from 0 to $400M the first time around!”
At the time, Sassano also highlighted that it is no secret how the growth and boom of DeFi is accelerating at a record pace, recording gains of up to 4 figures that mark a prominent upward trend, and that DEXs are handling a volume comparable to the trading volumes handled by some of the best-known centralized exchanges.
An incredible year for DeFi tokens
The protocols with the highest returns so far this year are: Aave, which so far in 2020 has exceeded a growth of more than 3.000%, according to the platform DeFi ReturnsLikewise, there are Yearn Finance's YFI tokens, Synthetix's SNX, Bancor's BNT, and many others that have experienced huge growth, while others such as the SushiSwap protocol's SUSHI token fell by more than 90% of its historical value.
Meanwhile, Messari researcher Jack Purdy notes that most major DeFi tokens continue to grow exponentially over the past 90 days, despite the recent “bloodbath” in the markets.
For his part, Sassano argues that DeFi tokens have also had an incredible year, with incredible returns and exponential growth. Sassano also points to the LEND token as one of the top performers this 2020, citing that this asset has had an absolutely incredible run, and that Aave has grown massively this year. The developer notes that Aave went from $1 million in TVL in January to over $555 million in TVL by mid-July. At press time, Aave sits at $1,01 billion, ranking #5 among the top DeFi protocols in the ecosystem.
Without a doubt, the direct interaction that DeFi allows its users makes this ecosystem an increasingly attractive one to offer a wide range of financial products in a decentralized way, as well as its capabilities to offer various methods to produce money and multiply the investments of its users. Decentralized finance (DeFi) is a gateway for traditional investors who want to enter the universe of cryptocurrencies, , blockchain technology and decentralization.
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