Over the past year, blockchain funds in the decentralized finance industry grew by 936%. What to expect from DeFI in the future and what is needed to continue its growth
One of the largest banks in the U.S., Bank of America published a report with a long-term assessment of the cryptocurrency industry. The bank’s analysts highlighted the DeFI sphere as one of the main growth drivers and predicted that the industry of decentralized finance will rapidly grow in the future. The paper also noted the benefits of decentralized applications.
“Applications built on this new software architecture appear to be growing faster than previous technologies,” the Bank of America report said.
A recent study by analytics platform DappRadar found that blockchain funds in DeFI projects increased 936% in the past year, to more than $114 billion. Blockchain funds are money investors put into DeFi projects to provide liquidity for projects to use for loans. DappRadar also noted that the decentralized finance industry is growing regularly and steadily, unlike the market for non-exchangeable tokens (NFT), which has seen isolated spikes in activity.
Back to 2017
Four years ago there was a similar “boom” – it took place around the sphere of ICOs (initial public offerings of tokens). A large number of criminals, who conducted fraudulent ICOs, took advantage of the boom in the sector and the lack of regulation of the crypto market. According to statistics, 94% of altcoins launched through initial public offerings fell in price to bitcoin by 90% or more. Only 10.8% of startups showed positive results, and 11 ICOs had investor returns exceeding 1000%.
ICO (Initial Coin Offering) is the sale of tokens by a project in order to attract investment for its further development. Ethereum, the largest altcoin by capitalization, also chose this model of investment attraction. In 2014, the digital coin was selling for $0.3, and in 2021, the token price reached a historical high of $4,300 (a rise of more than 14,000 times). As of October 5, 2021, the value of the altcoin is $3.3 thousand.
The current popularity of DeFI and the boom in the ICO market in 2017 should not be compared, experts say . Today, investors and traders are not only more educated and cautious when investing, but also to some extent protected by the law.
The industry of decentralized finance is definitely a trend of the future, the expert believes. DeFI-projects provide a reliable ecosystem in which all financial products are possible: from insurance to loans and savings accounts.
The impetus for the rapid growth of the DeFI-industry in the future can come from the introduction of decentralization principles in banks and other traditional financial institutions. This can only happen if the decentralized finance industry gets more defined regulation.
In the future, more and more people will begin to realize that the smart contract can be a worthy substitute for a traditional loan or bank deposit, leading to a large influx of funds into the DeFI industry from private investors and dozens of prohibitions and restrictions that will be lobbied for by bankers around the world.
“The decentralized finance segment will continue to grow and generate high returns for investors. But the maturation of the industry is imminent and will most likely begin with the onset of the next “crypto-zima.”
The likelihood of a complete collapse of the DeFI market is almost zero, because even if most projects leave, the idea and technology itself will continue to exist.
“The idea of organizing transactions through smart contracts can no longer be killed, barring fantastic scenarios of apocalypses with a complete regression of society.”