Darius Moukhtarzade is a researcher at Sygnum, the world’s first digital asset bank. Prior to Sygnum, he was a blockchain consultant at Ernst & Young and worked for several start-ups in the Swiss crypto valley.
Undoubtedly, NFTs received the most attention in crypto space in 2021.
Some market observers foresaw the popularity and use of it some time ago, but the surge in adoption by both traditional and crypto-native players surprised most of us. rice field. Punks, apes, and hype around rocks have cast a shadow over even the thriving DeFi sector.
Still, DeFi is back in the limelight next year and hopes to experience a second “DeFi Summer” as it did in 2020. There are two main reasons. Scenario; And the establishment of a regulated version of DeFi that I call RDeFi.
Attractive yield opportunities
Since the “DeFi Summer” in 2020, many new and innovative projects have emerged, and established projects have further developed products. DeFi offers very attractive yield opportunities, from 3-5% conservative products to 30-40% more aggressive products, depending on stablecoin, this year, especially in the first half of the year. The trend already seen was the generation of different types of yields. Investor risk appetite.
Many new participants in the cryptography that entered the space in recent Bull Run begin their exploration of DeFi. For some, it’s a “traditional” path from Bitcoin to Ethereum to DeFi. For others, it’s from NFT to Ethereum to DeFi.
The result is the same regardless of whether someone started with the mother of all coins or the cyborg shark. The adoption of DeFi will increase, which may lead to the summer of DeFi 2.0.
Avoiding high gas charges
The ETH 2.0 update is scheduled for the first half of next year, but I think Ethereum will handle very high network charges for most of the year.
This will continue to adopt DeFi, but investors will continue to use layer 2 scaling solutions such as Arbitrum, Polygon and Optimism, as well as alternative smart contract platforms such as Polkadot, Solana, Avalanche and Terra.
I’m very excited about Polkadot’s DeFi platform Acala, which recently became one of the first projects to get a parachain slot at Polkadot. Also interesting is Solana, who has gained a lot of NFT share from Ethereum due to lower network charges. Its high TPS and scalability enable DeFi applications not possible with Ethereum.
Appearance of “RDeFi”
In 2022, I think RDeFi “Regulated DeFi” will appear.
This may sound like an oxymoron to some, but we see it as the next evolution of DeFi. Alongside DeFi, which we all know and love, the parallel DeFi sector has emerged, reflecting its rebel twins, but with a regulated wrapper that matches traditional financial regulatory requirements. I think that there. This RDeFi is only accessible through the same customer-knowing process used by traditional investment products and must meet the same anti-money laundering standards.
Early examples of the 2021 RDeFi project have already seen that both the lending and borrowing protocols Aave and Compound offer platform regulatory versions of Aave Arc and Compound Treasury, respectively.
This trend is likely to continue, and I think other types of DeFi projects, such as DEX, will also offer regulated versions of the platform. You won’t be surprised to see the Uniswap Pro version next year.
We also expect more projects to be compliant from the beginning, such as Swarm Markets, which will act as the first regulated DEX with regulatory approval from German regulator BaFin earlier this year.
In addition, large exchanges such as Coinbase and Kraken expect to provide investors with access to DeFi applications through regulated gateways. Centralized exchange avoids the burden of self-management and private key management, allowing you to provide a DeFi platform without having to download a web wallet or interact directly with dApps. Such an offer will bring more adoption and liquidity to the space.
Some crypto indices claim that DeFi applications with KYC requirements go against the spirit of decentralized finance, but I make DeFi an economic model by owners and operators rather than services provided by commercial organizations. I prefer to define it as. Access conditions to the service do not change the economic model. The RDefi offering leverages the new customer base of these platforms. Regulated financial institutions cannot otherwise interact with these platforms.
In addition, regulations can add customer protection and hold the platform accountable. This may also be preferred by those who are not restricted to regulated services. I think this development will help mature the space. RDeFi is crucial to further liquidity of the DeFi platform and is, in fact, the only way regulated agencies can enter this space.
We hope that NFTs will continue to be of interest, especially in relation to Metaverse and blockchain-based games, but I think the DeFi space will be in the limelight.
DeFi matured last year and continues to be a highly innovative sector. High yield bonds continue to attract investors, and RDeFi takes Defi to another level, increasing recruitment and liquidity.
© 2021 The Block Crypto, Inc. all rights reserved. This article is for informational purposes only. It is not intended to be provided or used as legal, tax, investment, financial, or other advice.