DeFi has reigned supreme in 2020. There is no doubt about that. Ever since its appearance in 2019 under the name of ‘open finance’, it has made way for several innovations and advancements in Blockchain Technology. This explains why a horde of crypto enthusiasts rushed to DeFi protocols like liquidity mining during the summer of 2020.
Already established concepts in the DeFi space like Stablecoins – cryptocurrencies that are pegged to the value of USD or gold, shot up following the pandemic which puts its value and utility under the limelight. As the demand for Stablecoins continued to rise, there was a spike in activity in the other DeFi protocols like lending and borrowing platforms since these applications granted crypto users colossal interest rates on their digital assets which usually lay dormant. The total value and number of DeFi protocols are on a steady rise giving a strong impression that Decentralized Finance is here to stay.
So, what exactly is in store for DeFi this year? Experts are expecting no less than a boon for the blockchain industry and entrepreneurs and businesses alike are eagerly expecting the sector to take off further to facilitate their businesses. Here, you’ll get a detailed report of what to expect in the realm of Decentralized Finance in 2021
#1 The reign of Stablecoins
Over the course of the past year, over $20 million Stablecoins have been added to the market. As of now, Tether USDT is the top player, dominating 79% of the market. It is closely tailed by Circle USDC making the US dollar dominate the Stablecoin game. Observing this success, other fiat-pegged Stablecoins are now looking to take advantage of the resplendence observed in the DeFi space. Therefore Stablecoins will is definitely a strong contender for success within Decentralized Finance in 2021
#2 Non-Fungible Tokens
Another rare and surprising concept that is set to take off within DeFi in 2021 is Non-Fungible Tokens. Although it has been cast away as a niche sub-sector in the DeFi spectrum, it has advantageous and pragmatic use cases that are slowly garnering speed. Predominantly representing assets and rewards in Gaming, these tokens are now representing high priced collectible artwork and Footballers as well. Some of the big and eminent brands like top football teams are now offering gamers NFTs as incentives. This might just boost NFTs and make it the trending topic within DeFi in 2021.
#3 Cross-chain technology
Ever since the sudden boom of the DeFi space, the Ethereum Blockchain, the most critical element that is vital to the functioning of DeFi, has been overwhelmed. This led to an increase in transaction fees which inevitably increased the time taken to complete a transaction. This issue of scalability, though prevalent in Decentralized Finance, gathered more attention to its drawbacks. With a surplus amount of users flocking to these protocols, an immediate solution is necessary. So in 2021, experts reckon that cross-chain technology might be the saving grace for this mounting problem. Cross-chain technology seamlessly distributes the burden on Ethereum on other blockchain networks, evening out the strain. Currently, Matic, Cosmos, Polkadot are some names working on integrating this technology.
#4 Ethereum 2.0
Since the Ethereum network is apparently facing a ton of obstacles and because it is such an important constituent in DeFi, a second version of the infamous blockchain network is currently in the works. Many cryptocurrency experts and aficionados have their eyes set on what is yet to come and it could be anyone’s call. As discussed earlier the issue of scalability is expected to be solved since the entire DeFi sector’s functioning relies on it. ETH is the second most used cryptocurrency right now and is expected to reach an astounding value of $4000 in 2021. All one can do is wait and watch.
#5 Financial products pegged to DeFi
An acclaimed crypto derivatives exchange – FTX that is a pioneer in new crypto financial products has recently partnered with Uniswap and has launched the first of its kind UNISWAP-PERP contract. This enables FTX users to interact with quarterly, leveraged DeFi tokens for long periods of time without having to shell out high Ethereum gas fees. This contract is an index of futures formed at the top 100 liquidity pools in the Uniswap protocol. This new venture guarantees that more DeFi-based derivative financial products will be available in the crypto market sooner or later this year.
#6 Initial DeFi Offerings
Every time a new trend or protocol is introduced in the crypto world, one thing is sure to follow – Token offerings. A tradition that first began with Initial Coin Offering, followed by Security Token Offering, Initial Exchange Offering, Initial Dex Offering has now finally matured into Initial DeFi Offerings. The only difference from Initial DeFi Offerings is that these are governance tokens that are sold in contrast to the main native token. With these types of tokens, the holder gets to make decisions and vote on protocol changes within a community of other token holders. Experts predict that Initial DeFi Offerings will witness a spike in the DeFi space this year. Examples of these tokens include Compound – COMP, Balancer – BAL, and UMA protocol – UMA.
#7 E-Wallets are stepping up
Since most of you are familiar with the crypto world and its intricacies, one would be aware of the pivotal importance of E-Wallets. These are highly secure, protected and transparent, and easy to use for eager crypto enthusiasts. These wallets store digital assets and are requisite to perform various functions like swapping, exchanging or trading, lending, and borrowing on the Blockchain network. So herein lies the issue. Not all E-Wallets are compatible with all blockchain networks which lie as an obstacle for users. For example, one of the early E-Wallets introduced in the DeFi space was My Etherwallet (MEW) introduced by Ethereum. This lacked an interactive user interface. Hence currently, several blockchain engineers are working on building user-friendly and compatible E-Wallets that can be used across varied blockchain platforms. One successful example would be the Wombat wallet, developed by Gaming startup Spielworks, that provides users with access to several DeFi platforms that offer token exchanges, yield farming, borrowing, and lending. As more users are slowly moving away from traditional financial systems and towards DeFi, developments in E-Wallets are set to surge.
#8 DeFi Derivatives and insurance protocols
Another sub-sector of the DeFi space, one that has proved to be an underdog, is the DeFi Insurance protocols and Derivatives. Big names such as Nexus Mutual, CDx, and others have garnered quite a reputation in DeFi, making it a prolific sector that is guaranteed to grow. The cryptocurrency realm is gaining momentum as we speak with companies like Facebook and Paypal holdings making their entry. This is adding more leverage to the DeFi space, bringing new products into the market. Since then, it has become easier for entrepreneurs to launch DeFi insurance protocols thanks to Token Launchpads. This is making launching DeFi Insurance companies much more easier and accessible to eager entrepreneurs. Therefore, a whirlwind of DeFi Insurance platforms can be expected in 2021.
#9 Proof of Stake will take the limelight
Proof of stake is not an entirely new concept in DeFi. It was quite popular in 2020 and after observing its reveling success, staking continues to be interesting as many new players are entering the field. This will motivate staking products and services to capitalize on this sudden boom. Several top chains and networks are expected to make it big in the staking sector ever since leading names like Polkadot and Ethereum 2.0 have staked over $3 billion. With such whopping numbers, staking is sure to continue on its winning streak into 2021.
At the beginning of last year, the total value locked in DeFi amounted to about $1 billion. Fast forward to today, the DeFi landscape has made a drastic jump to over $19 billion, a 20X growth. DeFi has certainly established itself in the cryptocurrency realm and this trend is expected to continue.
That’s why we at Cryptocurrency Exchange Script are ahead of the game. Having been developing and launching DeFi protocols and services for many years, our repertoire is top-notch. From DeFi Smart Contract Development to DeFi Exchange services, we’ve got it all. All you need to do is to pitch your unique ideas for a DeFi project and we’ll get it delivered.
Schedule a call with us to know more about our services and how you can ace the DeFi space in no time!