The last few months have been a rollercoaster for the world of cryptocurrencies.
A high profile SEC lawsuit against XRP – the fourth-largest cryptocurrency, coupled with Bitcoin’s record ascent above $40,000 has really brought the world of crypto to the fore and livened up the Crypto news.
However, 2020, if anything was the year of the DeFI – Decentralized Finance.
For those that are not familiar with DeFi, sometimes referred to Open Finance, is the concept of financial services – savings, trading, insurance, loans all available on smart contracts thus opening the world to finance to anyone with an internet connection and free from government or company control. At a very basic level, DeFi takes out the middleman, meaning decentralized finance is cheaper, faster and more controllable than the ‘normal’ financial sphere.
Between September 2017 and September 2020, the total value held in DeFi contracts has surged exponentially from US$2.1 million to US$6.9 billion. By the end of the year, according to DeFi pulse, the dollar value of assets locked in DeFi protocols, closed 2020 above $13 billion, demonstrating 2,000% growth since January.
And, although we are less than three weeks into 2021, the good news is that DeFi is growing even stronger and even more important.
The role of Ethereum which today (Tuesday 19th January) hit an all-time high price above $1400, is very much crucial to the ongoing success and growth of DeFi.
Ethereum with its cross-chain technology was central to DeFi in 2020 and will remain so in 2021. It provides smart contracts which enable developers to build incredibly sophisticated functionality, far more advanced than simply acting as a P2P for crypto. These programs are what we now call decentralized apps, or dapps.
We are also seeing the major crypto exchanges getting into DeFi. Bitrue and OKEx were amongst the first to enter the DeFi marketplace. Now, Binance has entered the DeFi market with the launch of its new Launchpool platform.
This year may also see Ethereum challenged by the likes of PolkaDot and Cosmos who are both trying to build a network of independent but interoperable blockchains.
DeFi is opening the world of finance to us all. It will be become more and more part of our everyday lives. Maybe not today or tomorrow, but soon.
