How Has The DeFi Market Changed In 2020?
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Decentralized finance has become the # 1 hot topic in the cryptocurrency world in 2020. Users from all over the world have joined an alternative financial industry that offers lending, deposits, investments, trading, and a number of other instruments that were previously completely controlled by traditional financial institutions.
According to Google Trends, interest in DeFi has more than tripled this summer compared to previous years. Although this industry has been on the market for a long time, the real popularity came to it in 2020. We can say that Bitcoin became the first decentralized financial instrument. The second “restart” of the idea was implemented by Vitalik Buterin and his partners, who created Ethereum and smart contracts. The Ethereum network has shown how popular blockchain projects can be, and what tasks they can solve.
And now, in 2020, decentralization has reached financial services. When society saw the possible potential of DeFi in the implementation of classic financial instruments, the industry's success was irreversible. In a very short time, decentralized finance attracted billions of investments, and thousands of new projects appeared on the new market.
Decentralized finance has a capitalization of more than $ 12.4 billion, according to DeFi Pulse. And at its peak, this figure almost reached 15 billion. But even more surprising is the dynamics of decentralized finance capitalization: a year ago it did not exceed $ 700 million, and over the past 5 months it has grown 12 times!
According to Defi Dapp Review, about 70% of all blocked funds are in projects that specialize in lending and loans. It can be argued that this is the mainstream of the industry with the highest popularity.
Among the startups that hit the market in 2020, there were many "unicorns" whose price increased by thousands of percent, and then also plummeted downward. The reason for this was the usual speculation, as it once happened with cryptocurrencies.
Another major achievement of DeFi was the development of DEX - decentralized exchanges. The main difference between such trading platforms from centralized ones is the absence of the exchange's role as an intermediary between the seller and the buyer. In fact, all asset exchange operations take place directly between users, and the exchange is only a platform for such deals.
The rise in popularity of DEX has led centralized cryptocurrency exchanges to lose trading volume in favor of decentralized ones. In early autumn 2020, the aggregate trading volume of the 10 largest decentralized exchanges exceeded $ 30 billion. These are very serious indicators for such a young industry. However, DEX still have some problems with market making.
It's no secret that many experts and people just following the news compare the BOOM of DeFi's popularity to the 2017 cryptocurrency market rally. It's no secret that many experts and people just following the news compare the BOOM of DeFi's popularity to the 2017 cryptocurrency rally. And these two processes have a lot in common. First, DeFi is also a fledgling industry that attracts a lot of "easy money lovers". You can really make money on this, but just as quickly you can lose. DeFi is also attracting a lot of scammers, just like cryptocurrencies in the “Age of ICO”. Along with really high-quality projects that solve urgent problems, thousands of one-day projects appear on the market, the main task of which is to make money. In most cases, the team of such a project does not care about its future.
And the last similarity is the technical imperfection of decentralized finance. There are several reasons for this, among them: the novelty of the technology, which implies many early bugs; limited development budgets; the inexperience of the creators and developers of DeFi startups. It turns out that technical imperfection limits the potential of truly great technology.
To solve all of the above problems, we can use the experience of cryptocurrency startups. When professional teams work on decentralized projects, when the budget is enough to develop a quality product, then even skeptics will believe in the industry. It is fair to assume that getting large companies involved in decentralized finance can take DeFi to a whole new level. And there is already some progress in this direction.
The information about the launch of the project on decentralized finance xSigma, which is being prepared by the public company ZK International Group, has been confirmed. First of all, the xSigma DeFi department is going to solve the biggest problem in the industry - problems with market making on decentralized exchanges. The new DEX from xSigma should unleash the potential of the decentralized trading idea, providing users with not only a technically high-quality platform but also a user-friendly interface.
The launch of the decentralized exchange will be only the first stage in the development of the xSigma's DeFi ecosystem. In the future, the company plans to expand the list of services, as well as create new financial instruments. In 2 years, the xSigma team plans to release a stablecoin that will become part of their ecosystem.
xSigma’s product team is led by Alex Lebed, a software engineer with career stops at Facebook, Amazon, 1Inch, and also the founder of Stableunit.org. The team also features Harvard graduate and former Google engineer Kamal Obbad, and Daniel Garay, a project manager formerly of Ripple Labs and Google.
We have high hopes that such a serious approach will significantly improve the fledgling decentralized finance industry. Of course, the importance of pioneer DeFi startups to the industry is undeniable. After all, it was they who made the whole world talk about decentralized finance. However, for this technology to develop and improve, a lot of work still needs to be done. And I want to believe that the community will succeed!