The past year has been buzzing with increasing activities in decentralized finance (DeFi) and the blockchain ecosystem as a whole. From a total value locked (TVL) of $500 million on March 12 (the much talked about Black Thursday), DeFi has grown tremendously to become one of the most significant forces behind the cryptocurrency bull run of 2020/21. At the time of writing this piece, TVL in DeFi stands at over $50B.
DeFi and the Promise of a Fair Financial System
DeFi’s growth can largely be attributed to several reasons: COMP’S distribution of governance tokens, crypto awareness in general, and improved DeFi ecosystems over the past couple of months. However, many experts agree that growth in the sector can be mainly attributed to an understanding of it and its future potentials. The concept of decentralized finance is mainly hinged on the possibility of an autonomous, free, and fair financial system independent of the control of the governments.
By eliminating third parties and financial intermediaries, DeFi brings the whole spectrum of lending, borrowing, saving, investing and a host of other financial functions to the unbanked and banked. Besides eliminating financial intermediation, Yield Farming, arguably the most famous aspect of DeFi, paves the way for maximum profitability when users keep and move their crypto assets in decentralized protocols.
Challenges with DeFi
While DeFi has thrived magnificently over the past couple of months, there are significant questions still being raised over the profit, structure and ultimately, longevity of DeFi protocols and the ecosystem as a whole. Indeed, some of the raised questions are a non-issue if you have a robust understanding of decentralized finance...
This article was first published on bitcoinist.com.
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Written by Bitcoinist.