The space relating to decentralized finance (DeFi) is witnessing a massive revival with fresh projects garnering some attention and the overall value locked in DeFi platforms setting record highs. This revival happened in the backdrop of consolidation and is indicative of growing interest in decentralised financial services among amateur and professional investors.
Riding this wave are novel standards which seek to solve prior weaknesses in the DeFi ecosystem including capital productivity, interchain communication, and security. Some of these protocols include: Defi Nex which has had its TVL rise by 300% in the last one month due its unique way of offering yield farming and liquidity.
According to the founder of Defi Nex platform, Sarah Chen, the primary reason that has contributed to the success of the platform has been user experience and risk management. ‘We know that the DeFi protocols that preceded us have gone through various challenges and that is why we have designed a system that is protected from such adversities and at the same time sustainable,’ said Chen. This is especially true for the tokenomics proposed in the protocol, which introduced an embedded insurance model.
Another exciting project is Cross Chain DEX that can be described as a decentralized exchange enabling users to easily trade within different blockchain projects. Thus Cross Chain DEX instantly became popular among the active traders who seek to apply various strategies between different blockchains while solving the problem of cross-chain compatibility.
The DeFi boom has also drawn the interest of the traditional finance entities and is gradually making its way mainstream. Some of the world’s largest banks and investment companies have disclosed plans to investigate DeFi application, indicating a possibility of a union of traditional and decentralized financial systems. For instance, JPMorgan Chase & Co recently commenced a pilot on experiments regarding the DeFi solutions in wholesale funding.
A part of this institutional interest can be attributed to the evolving status of the regulations on DeFi. As orthodox authorities carve out polices regulating decentralized platforms more effectively, conventional financial institutions are forming more legitimate rationalizations for their engagement.
But the development of DeFi has also raised concerns over the stability of the sector as it continues to experience growth at an unparalleled pace. The issue of security is still an acute one, multiple successful cyber attacks and exploits demonstrate the imperative necessity of competent smart contracts auditing and management of potential risks.
Realizing such threats, the generation of DeFi insurance solutions has appeared, which provides users with protection against smart contract failures and other threats relevant to the DeFi market. Thus, the mentioned insurance platforms have increased in popularity as more customers consider insurance to be an integral component for dealing with DeFi.
The revived attention to DeFi has also led to the evolution of new governance models; many new projects are trying out unorthodox approaches to decentralized decision-making. DeFi 2. 0 is a term that is being talked about which is more sustainable than the first generation, better governance models and better risk control.
Looking forward as more projects are developed in the DeFi space, it’s is evident that the next round is more strategic than in the past cycle. Thanks to the new protocols that solve major issues and with a growing institutional attention towards the decentralized finance space, the future appears more and more bright.
