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The forecast on decentralized finance

DeFi

en.cryptonomist.ch 24 January 2023 09:47, UTC
  
Reading time: ~4 m

Decentralized finance (DeFi) is an innovation that enables many services, and the forecasts of many experts in the field see it at the center of every crypto project.

Despite the fact that it can still be considered as an entirely emerging concept, DeFi is already quite established today. Many experts are certain of this, the future of crypto sees decentralized finance at the center of many projects, the world is preparing for an open financial system.

Summary

What is Decentralized Finance (DeFi) and why are the predictions so promising?

Decentralized finance follows the same principle as distributed ledger technology (DLT) of cryptocurrencies.

It goes about eliminating the need for centralized financial intermediaries (banks, brokerage firms) and establishing stable Peer-to-Peer (P2P) networks for secure transactions.

These transactions are one of the key factors of DeFi, its independence from any centralized intermediary makes it an attractive alternative to the current financial system. We are talking about a highly modern technology, capable of authorizing people with an internet connection, to participate directly in transactions.

DeFi is part of the blockchain, which makes it secure and impervious to any kind of counterfeiting.

Decentralized finance offers autonomy and functionality to its users with a set of tools that reduce the operational risks of banks and brokerage firms. Its decentralized public blockchain governs every transaction within the industry, thus removing the cumbersome barriers of digital surveillance of transactions.

In the near future, the idea of decentralized finance being the basis for global transactions is thought by many.

DeFi removes the financial bureaucracy of banks, the absence of strict regulations ensures that anyone with programming skills can interact with the blockchain and innovate financial services. The legal constraints of banks do not allow this, and they also hinder many transactions across international borders.

A report dated 2021 by Gartner, explains that at least 20% of large financial organizations will switch to DeFi by 2024. However, it is not only Gartner analysts who foresee a prosperous future for decentralized finance (DeFi).

The future of DeFi according to venture capital firm Pantera

The venture capital firm focused on the cryptocurrency market holds as much as $3.8 billion in assets under management. Clearly, it has not proved immune to the frigid crypto winter of 2022. The fall of the Terra/Luna ecosystem and the collapse of FTX’s platform, somehow affected Pantera as well.

Thus, the venture capital firm found itself pondering what to work on to improve its situation, coming to the realization that work needs to be done on transaction fees, liquidity, and usability. In summary, with its forecast for 2023, for the Pantera firm the future is Decentralized Finance (DeFi).

CEO Dan Morehead explained that it is blockchain and DeFi that will solve the problems mentioned above.

Joey Krug, co-Chief Investment Officer of Pantera, wrote:

“Looking into the future, I think it seems pretty clear that the historical arc of the world’s financial binaries will eventually become blockchain-based systems using smart contracts. The real questions are how we get there and what needs to happen to get there.”

Joey Krug is indeed very proactive about DeFI, explaining that he sees a future where there will be easy access to decentralized finance. Where anyone can log in through an app, and have access to lower fees, global liquidity, and 24/7 operational markets.

MakerDAO implements $100 million on DeFi Protocol Yearn Finance

Decentralized finance giant MakerDAO on Monday approved a proposal to distribute $100 million in USDC, on the DeFi Yearn Finance protocol, where the deposited stablecoin will earn a return. MakerDAO will earn an interest of 2% per year.

The MakerDAO financial system is run by an autonomous decentralized organization, where anyone who holds the Maker token (MKR) can vote on proposals. The proposal in question was voted on by about 72% of voters. To fully approve the proposal, and thus implement the transfer of funds from the PSM, an additional “executive vote” is required.

MakerDAO is implementing a strategy to earn through its $7 billion reserve fund. By generating a steady revenue stream, it could make DeFi an increasingly attractive product. This is not MakerDAO’s first strategic move; in fact, the DeFi giant has various sources of returns such as its partnership with Coinbase and various investments in US government bonds.


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