The rise in popularity of decentralized financial services (DeFi) contributes to an increase in the share of digital assets in the global money supply market. Due to the growth of DeFi and stablecoins, the share of cryptocurrencies is currently 2%. Bitcoin alone takes about 1%, the rest of the digital asset market accounts for about 1.2%. The increased interest of investors is due to their desire to receive high profits from Bitcoin, stablecoins and altcoins.
DeFi development and their impact
Over the past month, the DeFi protocols built on Ethereum have grown steadily and have become more and more stable. Many tokens using decentralized finance have grown in value three or four times in a year, and some have increased significantly more, according to the independent research center Delphi Digital, which provides market analysis of institutional-grade digital assets. The center performed the analysis and from the results obtained, we can safely say that this year DeFi is a key sector for the digital coin ecosystem.
Delphi Digital reports that DeFi protocols from other blockchains have gained immense popularity this year. These include Binance Smart Chain (BSC), Solana (SOL), Avalanche (AVAX), Polygon (MATIC), and Terra (LUNA). Today, of the total value blocked by DeFi, alternative Ethereum blockchains account for about 34%.
The main competitor to the Ethereum ecosystem is Binance Smart Chain (BSC). Blockchain is now actively developing and DeFi based on it is becoming more and more. This growth in popularity is due to the direct connection of BSC with Binance, which has enormous opportunities and resources to promote its projects.
The role of stablecoins in the cryptocurrency space
In the study, Delphi Digital also separately highlight the huge role of its own stablecoins DeFi in development. Their market capitalization is now nearly $ 10 billion. The leading position is occupied by Dai (DAI), which has a capitalization of over $ 4 billion. Another rapidly growing token is UST in the Terra ecosystem.
Tether (USDT) and USD Coin (USDC) also play an important role in the development of cryptocurrencies in the global money supply market. The increase in trading volume for these coins has also contributed to the increase in the value of the entire cryptocurrency segment.
Why is DeFi so popular today?
– Firstly, regulators are lagging behind the crypto industry and DeFi has been able to thrive in this vacuum. For example, in traditional unsecured lending, there is a legal requirement that lenders and borrowers must know each other and that the lender evaluates the borrower’s ability to repay the debt. There are no such requirements, instead it all comes down to mutual trust and confidentiality;
– The second reason for the surge in DeFi is the involvement of major players. Many large financial institutions are starting to accept DeFi and are looking for ways to participate. For example, the 75 largest banks in the world are testing blockchain technology to speed up payments;
– Third, the impact of the COVID-19 pandemic. The pandemic has driven global interest rates down even further. In this climate, DeFi potentially offers much higher returns to savers than large institutions;
– Another big reason people are investing in DeFi tokens is not to be left out of their explosive growth.