A wave of screaming headlines marked a promising start of the new year as blockchain-based services' ongoing popularity made a swing and started to rise again.
With a surging number of protocols that try to outperform each other in the race for user wallets, the quality of services will grow by leaps and bounds. The segment is indeed becoming lucrative for the crypto traders with more new opportunities to gain high yields in exciting and highly-profitable experiments.
The absence of KYC-measures contributes to the new segment's growth, but don’t get blinded by the shine of digital gold - cryptocurrency is a volatile territory, and Decentralized Finance is a double-edged sword. The coexistence of two models, CeFi and DeFi, seems like the best approach to finding a balance in current conditions and offers robust services since some forward-looking companies already implemented this approach to their operations.
A new kind of finance gains momentum in the third decade of the XXI century. There is a unique emerging opportunity, and numerous developers across the world are engaged in the maturing industry to accelerate the pace of progress and change the traditional banking that hasn't seen such a lucrative reshaping opportunity for many centuries.
The highly-adored peculiarity of DeFi platforms is their core feature: a client does not need to store funds there to conclude transactions. Instead, coins are kept in the wallet - more freedom to the end-user.
DeFi is now paving a way to global adoption, which is evidenced by the total value of crypto assets blocked in applications (TVL) that literally skyrocketed - since the beginning of 2020, the segment has experienced a growth of more than 3,000% - from $687 million to more than $25 billion at the end of January!
Ethereum is currently one of the leading platforms used for creating and launching most of DeFi projects. Last year, more than $1 trillion worth of transactions were recorded on its blockchain. Sounds impressive? This revelation is even more convincing, knowing that these figures already overcome the volume of global payment giants like PayPal, which currently enjoys a broad base consisting of more than 350 million users.
Trading volume on decentralized exchanges (DEX) reached $ 33.5 billion recently, surpassing the previous record set in September 2020 due to the data provided by Dune Analytics. Over the past 12 months, the total trading volume on decentralized exchanges amounted to $ 152.46 billion, and the turnover over the past 30 days has exceeded a staggering $ 40 billion.
At the same time, data obtained by Messari indicates that leading segment’s projects Uniswap, AAVE, SushiSwap and Synthetix have all rallied by double-digits, creating a positive trend as more people engage with the protocols to invest in yield farming and profit on various flash loans.
In DeFi, the absence of burdensome KYC procedures is one of their key points that attract users and traders. Some platforms even switch to the DeFi model to remove mandatory verifications and ease the user journey and on/ramp in crypto. However, it’s not all about the benefits.
It is imperative to keep in mind that there are many loopholes in the DeFi sector these days. Investing may be profitable or lead one to total disarray as frequent trails in this field are hardly predictable. For example, early adopters of the YFI token made fortunes fast - this asset went to history as the most fast-growing one, it’s price growth rate even eclipsing the all-time crypto king, the Bitcoin.
The sharp increase in numbers of crypto adopters and massive demand for DeFi services recently has exposed many of the weak links and issues that users inevitably face - more fraud schemes, increasingly harder choice of platform, and low Ethereum network bandwidth, which led to a sharp increase in fees.
Such inconveniences drove the emergence of centralized banking platforms on the cryptocurrency market. Since these entities execute the same functions as the DeFi protocols, they are more accessible to the average Joe. Moreover, the DeFi-specific issues described above are entirely irrelevant for the CeFi.
The most used fintech apps that do not utilize the blockchain also enjoy more users in daily operations. For example, Revolut has a daily audience of more than a million clients.
Despite the latest advancements, the number of users in DeFi still incomparable with the number of clients of the least known banks and the cost of transforms with its wild swings, sometimes pose questions about the well-marketed statements about "cheaper transfer" options.
DeFi still does not provide the CeFi’s firm reliability, but the latest development of that front makes it possible to contribute to another advancement - a cross-chain model.
Advances made by Binance with it’s Smart Chain makes a difference with a new smart contract-enabled blockchain with a full-fledged environment for developing high-performance decentralized applications. It was built for cross-chain compatibility with Binance Chain to ensure that users get the best of both CeFi and DeFi combined.
Some companies have recognized the potential already and implemented this solution. EU-based centralized exchange STEX has announced to use this tool to expand into the DeFi ecosystem by opening direct, on-chain investments between blockchains, ushering in a new wave of CeFi capabilities that utilize the transparency of distributed ledgers like Ethereum and Binance Smart Chain.
This funding for expanded DeFi capabilities for the fiat-crypto heavy exchange is a well-thought strategic move. STEX is a European crypto trading platform for those who trade to earn, which provides a broad range of features to elevate user experience, offering more than 400 trading pairs and a steadily growing client base. Users can purchase crypto with a credit or bank cards, exchange fiat to crypto, or crypto to fiat with a few swipes on their mobile device.
The latest STEX’ collaboration is a partnership with Jointer - the commercial real estate backed DeFi project is built on the junction of emerging DeFi and PropTech DAO models, the decentralized autonomous organization that utilizes financial engineering and game-theoretic modelling to make the investments easy and available for everyone.
Jointer’s Auction will continue the daily dynamic offering, and STEX users can participate directly from their wallets. Each day carries a goal and a maximum amount of contributions possible. JNTR discount raises to 50% if the daily goal is reached - that means when the amount of tokens planned for each auction (a specific amount that changes) is sold.
“STEX engaged with Jointer having set an explicit purpose - not only to comply with the best available approaches but set new standards with emerging technologies. We found strong partners who share our goals and views on the crypto market - and it's the right time to push the boundaries and use the best quality-wise approaches”
- stated STEX founder Vadim Kurylovych.
There is no denying that both DeFi and CeFi models have drawbacks, and most likely, we will see the continued coexistence and further fusion of DeFi and CeFi projects in the forthcoming years. Only time and the natural pace of progress in the crypto market will determine which technology will be more viable at the end of the day.
All the hype ends sooner or later, but it will not stop quickly in the case of DeFi. This field is full of gaps and inefficiencies, but the more durable stones are laid into the foundation, the more solid it will become.
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