Blockchain technology along with cryptocurrencies has reached new levels while continuing to disrupt industries on the way. The growing popularity of the digital assets and the technology behind it has sparked a lot of interest from investors and thus resulted in fresh cash flow.
To keep up with the rising demands from a variety of investors, many new investment vehicles have surfaced. The impact that Decentralized Finance (DeFi) had on the market is huge and it comes with a lot of potentials. The DeFi space includes stablecoins, derivatives, decentralized exchanges, and lending services.
DeFi touching new heights
According to data from Defipulse, the total amount locked in the DeFi sector has hit an all-time high of $873.5 million. As per earlier reports, DeFi plays an important role in banking the unbanked and making the money market more efficient, the report highlights the $160 million growth in the sector and the prevalence of lending platforms like Maker.
Previously, The Daily Chain had reported that as one of the earliest Ethereum projects, Maker continues to shine as it is the dominant leader responsible for nearly 51% of the value locked within the lending sector as the process for generating Dai is pretty straight forward. A little bit of ether ($ETH) and a web 3.0 wallet such as Metamask or Ledger Nano S is needed to get started.
Growth throughout the sector
The Maker Foundation has seen a lot of progress in the last few years with its debt ceilings doubling consecutively for two years that pushed the debt ceiling up to 120 million Dai. By the end of 2019, more than $339 million worth of Ethereum was locked up as collateral.
Ethereum has definitely been leading the experimentation and exploration of new use cases. The second-largest cryptocurrency by market cap has almost 4 times more developers than Bitcoin, which could be explained by the friendly and supportive community and the capabilities of the smart contracts that allow developers and innovators to create new use cases for blockchain.
Tether (USDT) saw significant traction as the project migrated tokens from Omni to Ethereum blockchain. But this wasn’t the sole reason for USDT’s volume spike. As per CoinGecko data, USDT has a market cap of $4.28 billion and a 24-hour volume of $55.97 billion. The massive volume is the resultant of Tether’s lead as the stablecoin of choice for investors and traders.
Uniswap, a token exchange protocol, and liquidity pooling platform saw its total locked value rise from $470 thousand to $50 million in 2019, representing a 50X growth over the year.
Synthetix went from less than $2 million to over $150 million in total locked value in the same time period, to become the second-largest player in the market. On the other hand, Maker’s single collateral and multi-collateral Dai have over two million Ether locked up in contracts, representing 16% growth for the year.
One of the core reasons behind the success of decentralized finance is definitely the high returns. The stablecoin yields in the DeFi market are ordinarily above five percent. Compared to low yielding traditional assets, DeFi contracts provide attractive returns for investors.
According to reports, the entire market capitalization and trading volume have been steadily on the rise. The total market cap of the industry has gone up 44.1% gaining $60 billion over the year, closing the year at $180 billion. The growth in the DeFi sector has played a vital role in this.
The DeFi or Open Finance movement takes that promise a step further. It has the potential to become a global, open alternative to every financial service you use today like savings, loans, trading, insurance and more, accessible to anyone in the world with a smartphone and internet connection. This is now a reality on the Ethereum blockchain.
The importance of DeFi thus lies far beyond just an investment sector. The fast-growing market is all set to catch up with the modern-day financial services industry and the future of DeFi looks bright taking into consideration the growth this last year.