- Decentralized finance is the investment and trading of assets in a distributed environment without a central entity
- Defi metrics include, On-chain cryptocurrency value received, On-chain retail value transferred, and Peer-to-peer (P2P) exchange trade volume
What is DeFi?
Decentralized Finance is a form of Finance that relies on blockchain forms or distributed systems and does not involve financial intermediaries. DeFi involves the trading and investment of digital assets. Since the rise of the cryptocurrency markets, DeFi has attempted to go mainstream in the finance sector. It has been to no avail, but the fruits were not wholly futile. More investors have embraced the digital way of trading.
In an attempt to measure the adoption of Decentralized Finance, the Global DeFi Adoption Index has compiled statistics that show an 880% increase in the usage of DeFi. Instead of using the volume of transactions and the number of assets being exchanged, the Global DeFi Adoption Index uses non-professional and small-scale crypto traders. They also consider ordinary activities like making payments and savings, not just trading, exchanges, and making speculations. By doing this, they not only focus on big economies and markets which have the upper hand in cryptocurrency.
The metrics used in measuring DeFi adoption are pretty diverse and involving. These include; On-chain cryptocurrency value received, On-chain retail value transferred, and Peer-to-peer (P2P) exchange trade volume. On-chain cryptocurrency value received consists of measuring the amount of cryptocurrency activity concerning the wealth of individual residents of the country. The on-chain retail value transferred is done by comparing cryptocurrency activity done by retail transactions (which are assumed to be worth below $10000) to the wealth of individual residents of the country.
Peer-to-peer exchange trade volume involves the measure of cryptocurrency exchanged from individual to individual. This takes into consideration the number of internet users. The wealth of individuals in a country is determined by Purchasing Power Parity (PPP) per capita.
When these metrics are used, both developed and emerging markets are considered. Comparing both, there is a spike in DeFi adoption in emerging markets. According to Chainalysis, out of 154 countries, Vietnam, India, Kenya, Ukraine, and Pakistan took the top 5 positions in terms of DeFi adoption. The main explanation of these emerging markets is that they limit traders on the amount of money they can move in and out of the country. Cryptocurrency gives them a limitless chance to move finances for their needs which have encouraged many investors to join in!
DeFi going mainstream
Whether DeFi becomes such a distinct phenomenon in the financial sector, it is still away from becoming mainstream. According to DeFi Llama, there is an increase in the total value locked in DeFi from $5b to $182.21b today. However, this does not take into consideration the individual crypto traders who are mainly small-scale. Some have not embraced it as others, like various retail traders, term it as sophisticated.
Apart from this, there have not been significant steps towards metaverse ETFs. Many investors have stood up for the idea, and investments are beginning to rise in the metaverse. However, it looks like an affair of the upper social class because it is yet to be adopted and accepted by small non-professional traders.
By comparing how far we have gone into the cryptocurrency trade and how close we are to making it mainstream financial markets. With some developed markets becoming reluctant on the cryptomarket with issues like the China crypto crackdown, it will take a while to become mainstream.
New Order Collaborates with Outlier Ventures to launch new DeFi projects
An emerging community-led Decentralized Autonomous Organization (or DAO) incubator that is dedicated to early-stage Decentralized Finance projects in the market called New Order has recently announced a partnership with Outlier Venture’s Base Camp which is a renowned web3 accelerator. Together, both New Order and Outlier Ventures would release more than 30 different DeFi projects within the next two years.
The partnership was made possible after New Order managed to raise a total of $4 million through a private fundraising round which saw participation from several top-tier venture capital firms as well as certain angel investors. This private funding round was ultimately led by Outlier Ventures, Digital Finance Group, and also LedgerPrime.
According to the DAO incubator company, the funds would support the launch of incoming DeFi projects during their early stages. New Order is set to go live in December as a DAO incubator to start working on its initiative of releasing up to 30 new DeFi projects each year.
Layer-1 networks along with DeFi projects are on New Order’s radar at the moment to create its original venture platform in the future. The co-founder of New Order, Eden Dhaliwal agrees that their DAO structure is committed to bringing together some of the best DeFi builders available while taking care of funding and building with the support of their community from the very beginning.
As DAO models continue to be a symbol of successful initiatives that gain not only support and popularity among other blockchain-powered projects, New Order presents an advantageous opportunity to democratize access to investing. It is permissionless and equally open-source to provide resources to next-gen DeFi projects. New Order would be opening up a DeFi marketplace for revenue in the form of BTC, ETH, and supported stablecoins, thus making it an increasingly diversified DAO Treasury.
The partnership between New Order and Outlier Ventures is a positive indication, especially when the DeFi incubator is already on its way to becoming one of the key innovators within the Decentralized Finance space. New Order is assisted by its existing community of builders, smart contract devs, and interested investors to give rise to the next-gen DeFi apps (some of which would also support the Metaverse).
The long list of corporate supporters who have joined New Order as investors would help extend the reach of the incubator’s to build a bridge between offline and online worlds and also design DeFi startups with untapped potential.
One of the leading investors of the recent private fundraiser, LedgerPrime’s CIO, Shiliang Tang said that the changes in coordination through DAOs have led to this collaboration among early-stage venture creators. The company’s involvement with New Order is in fact an important aspect of empowering builders to redesign structures located outside orthodox venture models.
SEC Chair: Innovation Around DeFi “Could Be Real”
Gary Gensler believes that DeFi could offer “real innovation,” but he is convinced that the sector will not survive without regulatory compliance.
U.S. Securities and Exchange Chair Gary Gensler said that new technologies do not tend to persist if they fail to come into compliance with the law during a fireside chat with Jay Clayton at the Digital Asset Compliance & Market Integrity Summit.
While Gensler believes that decentralized finance could be the source of innovation, he claims that it has to fall within the existing regulatory framework:
The innovation around DeFi could be real, but they won’t persist if they stay outside of the regulatory framework.
Gensler also voiced his concerns about the centralization of some DeFi projects and implied that the goal of such projects might be to skirt existing anti-money laundering laws.
Speaking of the regulator’s reluctance to approve a spot Bitcoin exchange-traded fund, Gensler told No. 42 that trading around the globe is not inside the U.S. regulatory register. He urged the trading and lending platform to “come in and talk”:
Trading and lending platforms are really in an important place for investor and consumer protection. Come in and talk to us… work with us. Where appropriate we’ll use the enforcement tool. Work to get registered with the law.
The SEC boss has reiterated that stablecoins remind him of poker chips at a casino:
[Stablecoins] made it more efficient within the ecosystem. But it also allowed people around the globe, the people who tried to, to avoid money laundering and tax compliance in jurisdiction after jurisdiction.
According to Gensler, stablecoins are responsible for 80% of trading on the crypto market.
Huobi Primelist-Supported DeFi Project Drained of $31 Million
Days since the last DeFi hack: 0
Decentralized finance protocol MonoX Finance has been drained of $31 million as the result of a hack that occurred earlier today.
It was the third project to appear on Primelist, the token listing platform of major cryptocurrency exchange Huobi, earlier this month.
The team has already addressed the incident in a statement on Twitter, claiming that a vulnerability in the swap contract was used by the attacker to artificially inflate the price of the MONO token and then purchase all digital assets in the pool.
This morning our contract has been exploited. We are sorry to our users who have deposited funds. The team is investigating and will try our very best to get the stolen funds back. We thank our community for your support.— MonoX (@MonoXFinance) November 30, 2021
In a lengthy Twitter thread, MonoX also made a desperate plea to the hacker in an attempt to reach out to him/her:
We also really wish to have a chance in talking with the “hacker”. We value very much for what we’ve built for the current and future MonoX, and most importantly our users and their funds; PLEASE reach out to us.
The attacker pocketed $18.2 million worth of wrapped Ether (WETH) and $10.5 million worth of Polygon (MATIC).
In early August, $610 million worth of crypto was stolen from cross-chain DeFi project Poly Network, which marked the biggest DeFi heist to date. After several weeks of headline-grabbing drama, the hacker ended up returning the entire sum, which led to plenty of speculation about his real intentions.