The DeFi proponent claims his nascent industry will continue to grow and eventually deliver on its promises.
“By removing the need to rely on intermediaries, DeFi makes traditional banking much more accessible.”
Major DeFi protocols now seek exposure to real-world assets.
DeFi has “crossed the boundaries of speculation and investment”.
After all, the not-so-decentralized decentralized finance (DeFi) is currently undergoing a period of soul-searching.Since then Terra DeFi collapsed in May, resulting in many platforms, but DeFi is more than cyclical lending and recklessly leveraged speculation, a chain reaction of failures that could set off a chain reaction of failures if the dominoes toppled. There was a general feeling of not providing a
There’s certainly something to this suspicion, given that Terra’s failure led to others. However, someone working in the cryptocurrency and DeFi sector asserts that DeFi is still a young field and will mature and solidify as it evolves.
Indeed, many argue that DeFi will become more integrated with traditional finance in the coming years, but we will also see applications beyond finance, such as the Internet of Things, digital identities, and data storage. And the more we do this, the less it revolves around the precarious practice of lending and borrowing just for speculation.
DeFi’s Possibilities Beyond Guessing
Criticism of DeFi has run its course since May, when Terra’s pegging and collapse rippled through the industry.
While some platforms are stepping in to help strengthen the sector, software engineer turned crypto skeptic Steven Deal said in late June that “most of the decentralization rhetoric in crypto is is ambitious at best and empty marketing at worst.” in the meantime, meta mask Co-founder Dan Finlay told Vice in July, “Many of the collapses that happened in this last round were branded as DeFi, but in reality they were like shadow banks with huge leverage. It was something,” he said.
One commentator even suggested that “DeFi is dying” in response to the summer collapse, while two other prominent cryptocurrency skeptics, David Gerard and Amy Castor, said DeFi ‘s “Dead and Dying List”. in the meantime, FTX Founder Sam Bankman-Fried compared DeFi yield farming to Ponzi schemes.
Fundamentally, the gist of all these criticisms is that too much DeFi involves highly leveraged speculation. The platform accepts deposits from users after promising high yields and uses these deposits to lend to other platforms or invest in itself. Of course, the cryptocurrency market is notoriously fickle and volatile, so speculating with other people’s money is rarely a good idea.
However, there are still many DeFi advocates within the crypto sector, all of whom continue to affirm that the sector will continue to grow and eventually deliver on its promises. Includes Jason Ma, the network’s business development director. acceleratorwho says Cryptonews.com DeFi is a natural evolution of the current financial system.
“DeFi eliminates middlemen and central oversight, makes financial markets more accessible to retail investors, and creates new investment opportunities. It democratizes banking and finance by providing access to
Regarding its potential, Ma argues that DeFi draws many strengths from the use of blockchain technology. For example, transparency to improve due diligence and help people identify and avoid potential financial fraud and harmful business practices. Similarly, the immutability of Smart Her contracts provides better protection against malicious individuals and fraudulent transactions.
Other numbers agree when it comes to acknowledging DeFi’s future potential, but it hasn’t happened yet.
“DeFi is one of the most compelling use cases for cryptocurrency because it allows any business logic to run on-chain in a transparent and trustless manner,” said Till Wendler, co-founder of the economy of things blockchain. It could become one,” he said.technology provider peak.
Obtaining this type of testimony is not difficult. Commentators within crypto have made bold statements on behalf of DeFi, arguing where it might end up in the long term.for
Pedro Isaac Lopez, Chief Growth Officer THOR wallet DEXDeFi is a “key ingredient” in building a more inclusive global financial system.
“By removing the need to rely on intermediaries, DeFi makes traditional banking services much more accessible and opens up a range of innovative tools enabled by blockchain technology. includes swapping, borrowing or lending, generating yield from crypto assets through pooling, and yield farming,” he said. Cryptonews.com.
Lopez points out that even after the recent recession and subsequent collapse, the total value locked in DeFi platforms in the ecosystem has hovered around US$70 billion. DefilamaFor him, this is a sign of DeFi’s robustness, which will ultimately be used to deploy and manage capital more efficiently and adapt to changing market conditions in ways not previously possible. It shows that
DeFi present and future
Skeptics may argue that such ambitions have not yet materialized and may never materialize. That said, there are many examples of DeFi platforms not only signaling a utopian future, but achieving things today.
“As an example, manufacturerDAO The community recently passed a proposal to integrate US banks into its collateral system.” Huntingdon Valley Bankthe current debt ceiling with MakerDAO is US$100 million after the Maker community voted to accept it into the ecosystem.
“By depositing collateral in an off-chain account, you can borrow amounts on DAI. Five other real-world assets have been integrated into MakerDAO, and more proposals are forthcoming in discussions at the governance board. It’s been done,” added Ma.
Manufacturer Also The DAI recently voted to allocate US$500 million to US Treasury bills and corporate bonds. This means that DeFi has begun to play a role in allocating capital to the global economy. If we accept that banks, treasury bills, and bonds are useful to the global economy, we may need to accept that DeFi is useful.
Till Wendler also agrees that more major DeFi protocols are seeking exposure to real-world assets, encouraging more B2B lenders to invest in companies that leverage DeFi to provide real-world services. I am giving an example. fair mint.
“Crypto mortgages are seeing momentum. The industry is slowly but surely moving towards real-world results, and if you want healthy revenue and service, you should be heading there.” ” he said.
According to Naureen Mustafa, head of exchange development at riskDeFi has started transforming the real estate, insurance, crowdfunding industries, and other sectors.
“For example, DeFi has eliminated the need for paperwork and all intermediaries in the real estate industry. It will now be possible to buy real estate tokens or outright property simply by signing a transaction via a digital wallet, allowing banks to , real estate agents, or government agencies,” she said. Cryptonews.com.
Recent examples of DeFi and real estate convergence include the announcement in June teller protocol When tower fund capitalThis allows Teller depositors to receive interest payments on mortgage and loan financing provided by Tower Fund Capital.
Indeed, partnerships like this represent a first step, but they show that DeFi is expanding and destined to be little more than a leverage mechanism for cryptocurrency speculation.
“While speculative lending and borrowing applications have seen the fastest adoption, we strongly believe the entire DeFi sector is in its early stages and will expand to include corporate finance, real estate, content production and distribution, and more. Mattias Tengblad, CEO and co-founder of chain-based crowdfunding platform Korite.
Many others say it’s still very early for DeFi and the recent crisis is Terra and Celsius Just help it mature. As Naureen Mustafa concludes, there is innovation at every level of the sector, from the underlying blockchain protocol to decentralized apps to front-end user experience.
She said, “We have crossed the boundaries of speculation and investment. Serious use cases are now being developed, and DeFi services are more transparent, powerful, and technologically advanced than centralized financial systems.” .”
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