DeFi is a movement to build financial infrastructure on top of blockchains. The goal is to make it easier for people to invest in cryptocurrency in Nigeria and worldwide, exchange them for other assets, and perform other financial transactions—and do so without going through centralized systems that can be hacked or manipulated. The DeFi summer has been a time of explosive growth for this movement. In the last year alone, there have been more than 10,000 new projects launched on Ethereum and EOS blockchains alone—and that doesn’t include all the other emerging platforms.
DeFi’s first wave was funded by a massive amount of liquidity locked in the sector
One of the most exciting things about the DeFi market is how quickly it has grown over the past few years. One of the biggest catalysts for this DeFi expansion is that so many interesting projects are being built on top of Ethereum and other blockchains, which means an endless supply of innovation is coming out, as can be seen on the Ethereum block explorer. These innovations not only create new ways for people to interact with one another through blockchain technology, but they also provide access to financial instruments that were previously unavailable or inaccessible due to regulation or other factors, making them enticing to liquidity providers. DeFi has become so popular because it allows anyone who wants access to financial instruments such as loans, bonds, or stocks without having any experience with investing or trading these instruments before. However, the future of DeFi’s growth is not only about making it easier for individuals to invest their money. It is also about making it easier for companies to raise capital and get funding from liquidity providers. In addition to that, the future of DeFi will also include a lot more innovation in terms of how these instruments can be used by investors and companies alike. There will be more options available on these platforms, which will allow both parties to gain better returns on their investments than they would have gotten otherwise.
Long-term growth will be fueled by yield-optimizing technology
Yield farming is a concept that can help decentralized finance grow in the long term. It will help solve some of the problems currently facing the DeFi market, such as scalability and liquidity. Yield farming is a system where people who have access to capital can loan their money out to other people who need it. This allows people who have a lot of money but not enough time or knowledge to manage it themselves to use their money by lending it out to others. This concept has already been implemented by companies such as Lendingblock, which allows you to lend your cryptocurrency assets to other people in return for interest payments. These companies allow you to access loans without worrying about whether or not they will be repaid on time or at all; they also ensure that you receive interest payments on top of any losses incurred during the term of your contract (if there are any). This means that users do not have to worry about whether or not someone will be able to repay them on time; they simply need their capital upfront to get started lending out money through these platforms.
Fundamental forces that drove the “first wave” will still drive the “second wave”
As we move into the second wave of decentralized finance, it’s important to remember that some of the fundamental forces that drove the first wave and the resulting DeFi summer will still drive the second. For example, many people believe that the first wave was driven by a desire for greater transparency and accountability in financial transactions. While this is certainly true, it’s also worth noting that this desire was only fueled by a lack of trust between investors and their financial institutions: liquidity providers wanted to see their money go toward something concrete and tangible—not just into a black box where it could disappear without explanation or justification for its use. Because of this, we can expect more companies to adopt more transparent practices to appeal to potential investors who share this same desire for greater accountability. This means that companies should be prepared for more substantive reporting requirements from regulators (such as increased transparency around management decisions) and from customers (who want to know exactly where their money is going). The first generation of DeFi protocols, or DeFi 1.0, was largely driven by the need to solve fundamental issues with traditional financial services: trust and stability. The crypto community saw the potential of blockchain technology to provide a more transparent and fair way of managing money. The original goal of DeFi 1.0 was to build a new kind of global financial system that would be governed not by centralized institutions but by a decentralized community of users and developers who could control their funds without having to trust these institutions with their money. This vision has now been realized through DeFi protocols like MakerDAO and Compound, which allow users to leverage smart contracts as collateral for loans against their crypto assets. In addition, channels like Dharma and WeTrust provide a peer-to-peer lending platform where lenders can earn interest on their deposits. At the same time, borrowers get access to affordable credit when they need it most (e.g., during a recession when banks are tightening up on their lending requirements).
The DeFi sector is making it easier to get started
It’s easier than ever to get into the DeFi sector. There are tons of platforms and tools that make it easy to launch a decentralized application, or “DApp,” as they call it. You can even get your own Ethereum address and start sending and receiving tokens right away. The best part is that there’s so much opportunity in this space, especially for people who want to build their own DApps from scratch. And if you’re not tech-savvy, plenty of companies offer development services for developers who don’t want to build their own DApps from scratch.
Conclusion
The tech companies in the next years will make it really exciting for the DeFi market, with more and more developers trying out new ideas. There are many potentials there that we can’t overlook – one only needs to look at how much activity there is on these platforms to see if the interest level is high. Despite the future potential discussed in this piece, DeFi is still largely nascent. It’s impossible to know what this landscape will look like in a year or even five years. But if you’re interested in working with the Ethereum blockchain or simply using some of the apps that are being built on it today from users all over the world, keep an eye on DeFi’s growth. By extension, keep an eye on open finance applications more generally. They aren’t going away anytime soon.
