DeFi Market Prospects for 2020

Index
    DeFi 
    DeFi

    If you believe Binance Research then the decentralized finance market experienced a mini-boom in 2019 , expanding both the customer base and infrastructure. And although the share of DeFi even in the cryptocurrency market remains relatively small, the sector is growing rapidly and attracts many traders and investors with its capabilities. What caused this interest and what are the prospects for DeFi in 2020?

     

    Who should pay attention to DeFi

    Рынок DeFi
    DeFi market

    We already wrote that what benefits decentralized finance can bring to various market participants, however, an increase in the number of working platforms allows these abstract advantages to be translated into specific project names. These DeFi services will benefit:

    Investors

    Platforms like Dharma , Compound immediately open two ways to earn money on crypto without trading:

    Deposits and staking - for blocking a certain amount of the platform, they are ready to pay from 2% per annum depending on the currency and the site. It’s convenient to monitor bids here .

    Direct lending - on EthLend (Aave) and similar services, users can issue direct loans to other users in Ethereum , ] at a certain percentage.

    ☝️
    The fundamental difference between DeFi and cryptocurrencies for investors is that for the first time they receive income directly in cryptocurrency, and not in fiat from due to market changes in value.

    Before DeFi, it was only possible to obtain currency by mining or by purchase.

    Traders

    Трейдинг
    Trading

    Traders also received a couple of tools for comfortable operation and use of their cryptocurrency assets: 19459011]

    Quick loans - thanks to MakerDAO traders can quickly get a loan at the DAI stable block on the security of ETH, without the need to sell their assets. This is useful if you really need money, but you don’t want to sell cryptocurrency at a low cost. Well, and InstaDApp integrated with Maker, Uniswap and Kyber will provide several services at once, including credit, deposit and exchange.

    New trading opportunities - dYdX and Harbor are examples of decentralized platforms for trading cryptocurrency derivatives based on ETH. Futures and options for ETH have become a reality and, unlike BTC, are promoted by non-centralized sites.

    Decentralized exchanges are currently the leader in terms of transaction volume among all DeFi sites. Traders on DEX can trade without verification and with virtually unlimited jurisdiction.

    Such a relatively modest set will allow you to get free funds for trading , deposit what was previously possible only to go around and quickly exchange a crypt for a crypt, without complex verification.

    Developers

    Разработчики dApps
    Developers dApps

    According to Defiprime on April 237 projects in the DeFi sector launched or under development. Part of these projects are tools for creating new platforms, applications and services. So, for example:

    • Dharma is a protocol for lending and deposits using which each user can create their own dApp using Ethereum smart contracts ;
    • 0x - a protocol for a decentralized exchange of cryptocurrencies, on the basis of which a decentralized exchange can be launched. And here is the dynamics of trading volumes on exchanges with 0x:
    Объемы торгов DEX на базе 0x
    DEX trading volumes based on 0x
    • [ 19459032] DutchX - a protocol for decentralized token trading ERC-20 with which you can launch your trading pairs and conduct trading using the so-called the Dutch auction .

    And this is only a small part of the developed tools. In the Infrastructure & Dev Tooling section on Defiprime , 36 projects are now registered with varying degrees of implementation. Therefore, developers of decentralized applications already have or will soon receive powerful tools for working in DeFi.

    A useful link from the publisher is Defirate . English-speaking users here will be able to get acquainted with the main projects of the industry, find out the latest news and even read case studies.

    Technical side of the issue: blockchain and decentralization

    Разработка приложений DeFi
    Development of DeFi applications

    The leading blockchain for development on DeFi is Ethereum Actually, initially the share of the sector in the cryptocurrency market was estimated only by the number of blocked Ethereum.

    ☝️
    Currently, more than 80% of the development for DeFi is conducted on Ethereum.

    Ethereum domination is explained by both technical advantages - relatively high bandwidth, low-cost smart contracts and a convenient currency for micropayments, and the industry’s monopolist - Maker launched on this blockchain. And although Maker’s market share is gradually falling, new developers still prefer Ethereum:

    Количество заблокированных средств в ETH
    Number of blocked funds in ETH

    Practically there are no projects on Bitcoin . Decentralized finances on this blockchain include only the payment system Lightning Network with its very small daily volumes:

    Среднесуточные объемы Lightning Network в 2019-м
    Average daily volumes of the Lightning Network in 2019- m

    Actually, the number of blocked bitcoins does not compare with Ethereum:

    Количество заблокированных средств в BTC
    Number of blocked funds in BTC

    [ 19459007]

    We add that for some time the volume of blocked funds (in dollars) was dominated by EOS:

    Объем заблокированных на блокчейнах средств в июне 2019-го [19459 004]

    The amount of funds blocked on blockchains in June 2019

    True, this happened after the launch of EOSREX - a project on leasing computing resources that allows users to earn while holding REX tokens that are issued for freezing EOS . Actually, EOSREX has remained the main DeFi development on this blockchain. Now there are prerequisites for a structural change in the blockchains of the sector, but more on that below.

    Regarding the decentralization of DeFi services, it also raises questions. So, on November 18, 2019, when Maker switched to a multi-collateral system, 150 addresses voted, however, more than 50% of the votes fell to only 5 of them.

    Kyle Kristen - bZx strategic director developed criteria for evaluating the centrality of DeFi projects, including custody, the ability to publicly set rates and token prices, and others. According to his conclusions, the key players in the sector are now located on the centralization scale as follows:

    Степень децентрализации DeFi по шкале Кайла Кристена
    DeFi decentralization rate on the Kyle Kristen scale

    Therefore, on this DeFi industry development stage is not entirely decentralized. Although, as already mentioned, most of the projects are still at the development stage and in the future the share of decentralized applications and platforms may increase.

    Prospects for DeFi in 2020

    Перспективы рынка DeFi
    Prospects for the DeFi market

    Charts 19459073] 1945900] 1945900] 1945900] 1945900] They say that starting in 2019 the volume of the decentralized finance market, though not without interruptions, is growing. And although dollar investments sagged strongly after the fall in the value of cryptocurrency, the amount of blocked ETH is almost 3 million coins. How will the structure of the ecosystem and the market as a whole change this year?

    Technological trends

    The success of Ethereum projects encourages many developers to create analogues on other blockchains. This will expand the number of currencies used in DeFi and reduce the load on the Ethereum blockchain , in which transaction volumes have grown significantly.

    According to DappReview , DeFi platforms based on Ethereum projects provided 778% increase in transaction volume in the first quarter of 2020 compared to the same period in 2019.

    Among the "alternative" DeFi we can already name:

    • YoloSwap - EOS-analogue of KyberSwap;
    • Equilibrium protocol - EOS analog of Maker;
    • Acueos - EOS analog of Compound;
    • Alchemint - NEO analogue of Maker;
    • PoloniDEX - a decentralized exchange based on Tron;
    • Switcheo - a decentralized exchange based on NEO;
    • Djed - an analogue of Maker on Tron.

    As well as a number of other decentralized exchanges, the rapid growth of which forms a DEX boom. Of course, these analogues are unlikely to receive the same distribution as their Ethereum originals, but together they can reduce the share of Ethereum in the total sector. Well, in order to overtake Ethereum, NEO , EOS and Tron will need original developments, which we are very likely to hear about in 2020.

    Changing the market structure

    Not only the main blockchain (Ethereum), but the main platform - Maker and its DAI token can lose their dominant position in the sector. In 2019, the total amount of funds blocked in these tokens gradually fell:

    Динамика доли DAI в общем объеме заблокированных средств
    Dynamics of the DAI share in the total amount of blocked funds

    A At Compound, USDC moved DAI / SAI emission shares by a total of 25%. Here is the growth chart for the volume of USDC blocked:

    Объем заблокированных на Compound USDC
    Volume blocked on Compound USDC

    In addition, the share of blocked funds on similar platforms is growing like Synthetix:

    Объем средств, заблокированных на Synthetix
    Amount of funds blocked on Synthetix

    And Fulcrum / bZx:

    Объем средств, заблокированных на Fulcrum/bZx
    Amount of funds blocked on Fulcrum / bZx

    Economic integration

    Создание DeFi-альянса 
    Creation of the DeFi-alliance

    April 8, 2020 Volt Capital, Jump Trading, CMT Trading and DRW Trading formed the Chicago DeFi Alliance. These trading companies intend to build a bridge between decentralized finance and Chicago's trading infrastructure by selecting DeFi startups whose products will benefit the traditional commercial sector.

    Also in April, Bitfinex added pBTC to the listing, a Bitcoin-specific token that, along with pETH, pEOS, pLTC and pDAI, is planned to be used in DeFi services. And Coinbase Pro will allow the oracles of various platforms to receive information about cryptocurrency quotes to create derivatives and the correct operation of protocols.

    These are the first steps of centralized (exchange) and traditional (traders) market players to meet decentralized finance and they create the preconditions for sector growth in the near future.

    Thus, in the first quarter of 2020, we observe three trends in the DeFi sector:

    1. The growth in the total market volume, which clearly demonstrates the jump in the volume of transactions on Ethereum.
    2. Transferring projects to analog blockchains and developing new projects on Ethereum.
    3. The gradual elimination of the Maker monopoly and the increase in the share of other platforms.

    Together, this gives all reasons to believe that 2020 will be a year for the small but dynamic DeFi sector to grow and develop the ecosystem.

    See also:

    Stablecoins: a safe haven for the period of crisis

    There is no odious Justin Sun or 199010 ]

    5AMLD: the prophecy about the EU crypto apocalypse did not come true

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