Decentralized finance (DeFi) has been one of the hot topics in 2020, alongside the current Bitcoin price rally, Ethereum 2.0 launch, a global economic meltdown caused by the coronavirus, and more.
DeFi, however, stands as a different kind of trend, or phase in crypto development, than the trends that came before. In the past, the crypto industry saw ICOs and IEOs but all of them were dedicated to raising money in exchange for promises that sometimes could go for years without being fulfilled.
DeFi focuses on financial inclusion, and allows crypto users to access digital banking services, and earn through exploiting decentralized banking with nothing but their smartphone or computer.
This is an interesting period in crypto history, as Bitcoin is leading another rally and causing a new wave of crypto adopters to search on how to buy Bitcoin; institutional investors are entering the crypto sector directly or indirectly faster than ever; PayPal has gone crypto; adoption is surging; COVID-19 led to a global economic meltdown, which allowed the crypto industry to show its true potential — which it did; and more.
In the middle of all that, DeFi exploded and became the most dominant trend. Even now, as Bitcoin hit a new ATH and the year is coming to an end, Decentralized Finance continues to grow and attract attention just as strongly, even causing experts to share their views on what is to come.
As always, the predictions for the future can be quite different from one person to another, and that is true even among experts. Still, it is interesting to see what those who have knowledge and experience think, as they typically have a much deeper understanding of trends than casual crypto enthusiasts.
Bohdan Prylepa, the CTO and co-founder of Prof-it Blockchain Ltd when asked in a recent interview whether or not DeFi can help steady the global economy, Bohdan Prylepa, the CTO and co-founder of Prof-it Blockchain Ltd, when he was asked in a recent interview about DeFi place in the world economy, said:
“DeFi is still experimental. With crazy APRs and heists sending chills down investors, it may be years before this happens. Even so, DeFi is interesting but we shouldn’t get ahead of ourselves. It is still the Wild West, and more work—structural, legislation, and infrastructure, needs to be done before DeFi plays a crucial part in steadying the global economy.”
He still believes that DeFi will have a massive impact in the crypto sector. It’s just too early for it to do so. But, with that said, he added “However, I’m not being dismissive. The rise of decentralized exchanges like Uniswap could take away some of the centralized exchange’s market share.”
Basically, while Prylepa doesn’t expect that every DeFi project will grow to become a major hit anytime soon, there are some that are ahead of the rest — maybe due to true demand, or maybe because they were at the right place at the right time.
Something similar was said by NEM’s Head of Trading, Nicholas Pelecanos, stated that DeFi is garnering a lot of attention, and that it acts as a great disruptor to traditional banking. He even mentioned a Messari report that noted that $500 million worth of Bitcoin has been ported to Ethereum in 2020, specifically for the purpose of participating in DeFi.
Pelecanos continued by saying that the DeFi boom follows the innovation adoption curve — a well-documented phenomenon that follows a specific pattern when it comes to new, promising inventions.
“Growth for an innovation, in this instance DeFi, is largely led by technological advancements, followed by capital and regulatory growth. Therefore, the overall growth of the space or ‘development’, is a function of usership, technological and regulatory growth, and capital,” he said.
DeFi provides a lot of services, but with all that said, DeFi is — not unlike the crypto sector itself — still in its infancy. A lot of it is still experimental, and anything can happen. Pelecanos pointed towards the financial collapse of YAM, which went down by 90% simply because it had a bug in its code.
This is mostly the dominant opinion in the crypto industry, shared by many other influential individuals. One example is Block.one’s CEO, Brendan Blumer, who said
“At Block.one we believe that there must be an evolution from DeFi to achieve a sustainable connection to the legacy economy and the creation of a more open financial system. We call it Open Programmable Finance, or ProFi. We think about ProFi like a bridge from the transparency and integrity of the EOS blockchain to the regulated financial world.”
Even the US Treasury’s Comptroller of the Currency, Brian Brooks, agrees. He spoke of decentralization and DeFi services, noting that “My view is that we are still in the first quarter of a longer game and many of the greatest benefits and advancements are still ahead.”
In conclusion, we can say that DeFi needs time to fully develop its potential. Patience is the key for everyone wanted to see the bright future of digital finance