DeFi bypasses the centralized intermediaries that slow down the process and add to costs in the traditional financial system.
Smart contracts replace intermediaries to facilitate low-cost, secure, and high-speed transactions without any restriction.
It’s one of the reasons Defi will eventually find its way into the existing financial infrastructure to facilitate services like lending, borrowing, remittances, etc.
The total value locked in Defi protocols has shot up from $17.3 billion in September 2020 to $94.2 billion on September 07, 2021. Defi experienced its first major boom with the rise of smart contracts-based lending, borrowing, and flash loans.
Flash loans are not secur loans that require no collateral or credit checks. But the loan must be paid within a single Ethereum transaction, else the transaction won’t go through.
Delivering on its promise
Despite such phenomenal growth, there is still plenty of room for growth and innovation. Decentralized finance’s promise is to make itself accessible and usable for everyone. That includes institutions as well as everyday people.
Institutions have begun to acknowledge its potential and benefits. They are embracing the decentralized financial railroads rather than watching it from the sidelines.
The current protocol models still have inefficiencies (why aren’t there single token liquidity pools instead of liquidity pairs?) that new DeFi initiatives will solve to ensure that the space becomes more attractive for institutions.
However, bringing everyday users into the DeFi ecosystem could prove challenging for a couple of reasons.
First, they are deeply entrenched into the traditional financial ecosystem. Second, they get overwhelmed figuring out the wallets, protocols, token swapping, yield farming, and other things they find complicated.
The DeFi ecosystem has to nurture greater trust and security while making it easier for people to transact across different blockchains seamlessly.
In recent times, we’ve seen blockchain protocols like Reef Chain giving decentralized app developers all the tools along with assistance in business development and marketing to build and scale dApps that even noobs will find easy-to-use.
Reef Chain is a one-stop cross-chain DeFi operating system built with Polkadot Substrate to make Defi easy to use for newcomers.
Its Global Liquidity Aggregator, Smart Yield Farming Aggregator, and Smart Asset Management make it easy for noobs to get started with yield farming.
Reef Chain has built-in AI tools that allow for asset management based on each individual investor’s plans, goals, and risk appetite.
If DeFi delivers on its promise, we’ll see institutions and everyday users flocking to the DeFi ecosystem, and eventually there will be a full-fledged integration of DeFi into the existing financial infrastructure.
Besides the obvious ones like liquidity mining, stablecoins, and the monetization of the gaming industry, DeFi is witnessing some more exciting trends.
For instance, social tokens are here to stay. RealVision CEO Raoul Pal predicts that social tokens would be the next big thing, disrupting all kinds of traditional industries in the next 5-10 years.
Social tokens have the reputation of a brand, individual, or community whose work you might want to support.
The token holders get exclusive perks from the token issuer, which could include exclusive content, digital merchandise, group chats, and more. The social tokens are decentralized and run on the blockchain, much like NFTs.
In another development, Bitcoin could enter the Defi club in a big way, all thanks to the Lightning Network. Unlike Ethereum, Bitcoin doesn’t support the smart contract functionality.
It;s meant to be “peer-to-peer digital cash” that would make payments faster and cheaper. But Bitcoin holders often struggle to make fast transactions with the OG cryptocurrency.
Lightning Network, a Layer-2 scaling solution for Bitcoin, brings the smart contract functionality to Bitcoin. It means Bitcoin would behave the same way Ethereum does.
Until now, Bitcoin owners were creating wrapped tokens (WBTC and others) to interact with Defi apps.
As an L2 scaling solution, Lightning Network moves some of the transactions off-chain to reduce the load on the main blockchain. Bitcoin is no longer just digital gold. Lightning Network has opened up new possibilities.
Institutions have become quite serious about gaining exposure to digital currencies and Defi assets. Everyday users will also embrace DeFi in a big way once it becomes easier to use.
In its next phase of growth, Defi would bring a flood of new users into the ecosystem by delivering on its promise to make itself accessible to everyone.
The Biggest DeFi Hacks in 2021
- According to DeFi Pulse, there is around $100 billion locked up in DeFi.
- In 2020, around $120 million was lost to DeFi hacks
Decentralized Finance deals with a decentralized ledger and lacks intermediaries, making it quite favorable but also risky. According to DeFi Pulse, there is around $100 billion locked up in DeFi. As the total value increases, so does the crime rate around it. Hackers have taken up the opportunity to loot investors as the business is booming.
Nevertheless, more measures have been taken to ensure the safety of investors’ assets. In 2020, around $120 million was lost to hackers. This year, the number is probably going to be much smaller, taking the current statistics.
Funds are swindled from the system by use of hacks, rug pulls, and system failure. However, these are vital areas that the platforms have decided to put significant concerns on to curb the crime. These are some of the biggest hacks that have taken place this year.
Significant DeFi hacks in 2021
Yearn finance flash loan attack
The attack on the platform happened in February this year. The hackers siphoned $11 million and managed to get away with $2.7 million as profit. They used $8.5 million as fees. The hackers used flash loans which they used to make a collateralized loan. The hacker then made a deposit in Yearns pool, which led to an inflation of DAI.
Monday 19th of April this year, a cyptojacking happened to EasiFi. The platform sits atop of the Polygon Network. A loss of $80 million worth of assets was lost to a strategic hack. The hackers took 75 million USD as assets and siphoned 6 million USD from liquidity pools. To recover the loss and prevent future similar attacks, the managing team altered the blockchain network protocol.
PAID Network major loss
The PAID network suffered a significant loss of around 180 million USD. Hackers managed impunity of 3 million USD. As if that’s not enough, the hackers minted PAID tokens worth above 180 million USD. It caused inflation in the supply of the tokens, which led to a drop in their value by about 85%. While some argue that the attack might have been a rug pull and not a hack, there are no facts attached to the claim.
Uranium Finance Token migration hack
An attack on the Binance Smart Chain network-based platform, Uranium Finance, happened during a token migration event earlier in the year. It was focused on BSC’s automated market protocol. The hacker managed to get away with 50 million USD after taking advantage of a coding error. He liquefied the process without revealing his identity.
Spartan Flash Loans hack
The Spartan protocol is also a BSC-based platform that suffered a hack in May this year. The project lost 30 million USD taken out by flash loans from PanCake. He altered the balance of assets that were locked in the liquidity pool. He withdrew the stolen funds by use of DEXs 1inch and Nerve Finance.
DeFi platforms should heighten their security measures since DeFi hacks perpetrators are busy developing better ways to manipulate loopholes in finance to their favor.
There’s more to DeFi than just providing liquidity
DeFi and liquidity
As the Decentralized Finance market keeps growing’ more investors are locking their digital assets with protocols. The DeFi market keeps creating a buzz around the business sector. From a platform with the simple task that enabled the exchange of ERC-20 tokens in a decentralized way called Uniswap to a worldwide utility tool in business. Decentralized finance is now a platform capable of activities on and around sales, yield farms, lending protocols, and staking platforms.
Due to the transformation of the Decentralized Finance market, there have been processes to advance the earlier protocols to be established to fit the current market. The more current protocols are also improved to include more digital assets into DeFi. The process aims to diversify the DeFi market to attract more investors into the digital technology arena.
Derivative exchanges have for a very long time a target for regulators. However, investors have bargained hard to have a decentralized option. They desire a platform that centralized regulators and the law do not target. As a result, they came up with protocols; dYdX AND Hegic. They offer regulation services.
DYdX is an exchange that works with the help of the Etheruem network. It gives investors a chance to exchange digital assets DYdX is aimed at availing a legit platform for investors to trade with a wide variety of crypto assets. This will increase the adoption of cryptocurrency in business. Hegic is also an Ethereum-based platform that is aimed at providing transparency during exchanges. It does this with the help of smart contracts and liquidity pools. DYdX and Hegic operate on a peer-to-peer basis, open-source software, and do not involve any centralized entity control.
What more to DeFi- but from liquidity?
Unlike centralized finance, decentralized finance offers investors an opportunity to trade without having to reveal their identity. This is so because a central control entity is not required to keep your information or follow up on an investor’s information.
DeFi facilitates crowd loans thanks to parachain auctions. This is done to keep the cryptocurrency ecosystem intact. Investors can hold or trade assets while influencing growth in the platform.
Parachaining is done thanks to Polkadot(DOT) and Kusama(KSM), cryptocurrency ecosystems. They ensure the peer-to-peer lending processes are done accordingly. Users holding KSM and DOT tokens can dedicate their assets to a pool, and their contributions are returned after a period of lock-up or bonding.
Currently, KSM holds $995, which was contributed to 16 projects. Nevertheless, 88% of the contributions made were from the first 5 projects out of 15. This means that the auctions were a success.
With the current processes incorporated with the earlier ways of DeFi, it is safe to say that the pressure on the online market is deserved hype. The DeFi market is doing well, and investors should be encouraged on the same. The DeFi market is a buzz maker and the future of digital assets and the virtual world.
The Fall of DeFi Tokens? Look Out for These Buying levels !
- De-Fi tokens are experiencing a downfall, buyers look out for entry points.
- Analyst’s hopeful that DE-Fi tokens will recorrect with Bitcoin’s trend.
Several De-Fi tokens are painting the chart’s red. The tokens are experiencing a downfall lately. While sections concern the fall of the tokens. Traders look out for an entry to the De-Fi space, for a steal deal. As traders are optimistic over the token’s future prospects.
Netizens believe the possible reason for fall to be Bitcoin’s current statistics. As BTC pair stands third to only USD and USDT pairs. Likewise, we can expect things to normalize in a couple of days. Crypto proponent enlightens that, the net exchange position of Bitcoin is back to normal. Indicating that the inflows are equal with the outflows, while outflow is slightly dominant.
From, the graphical representation it is clear that. The tokens are currently experiencing a dip or are neutral for the last 24-hours. The top tokens are facing a similar fate, most of which are closer to their support levels.
The De-Fi token at press time is valuing at $35.77. With gains being negative by 4.3% for the last 24-hours. The 24-hour volume stands at $507,374,151. The token is currently trading closer to its support levels of ~$35.40. However, LUNA did reach its 24-hour high of $37.41. The token needs to stick above its support levels, to resist dipping further.
Uniswap is valuing at $25.26, with negative gains of 5.5% for the past 24-hours. The 24-hour volume is at 330,903,397. UNI is also closer to its support level of $25.10, which remains crucial for the token. A symmetrical triangle is currently formed on the charts, indicating a healthy consolidation. The statistics are however from press time.
The circumstances with LINK is no different, as it is trading closer to its support levels of $25.123. With the price at $25.82, the volume for 24-hours stands at $833,657,431. LINK broke its support levels of $25.82 recently. The respective stats are from press time.
The De-Fi tokens as aforementioned are currently facing high tides. Hopefully, the tokens will manage to rebound with the poised bullrun. An analyst is hopeful of many altcoins going 10X before the end of the year.