DeFi - More Than A Temporary Disruption
Disappointment & Disruption
The term “DeFi” was only really coined in 2020. However, there were earlier protocols that were essentially DeFi in nature. It was just that the classification and terminology of “DeFi” were yet to be born. Essentially, this means that 2022 was, in fact, DeFi’s first official bear market. You might recall that DeFi experienced an initial rally in 2020, only to later collapse that very same year. However, it turned out to be nothing but a breather. DeFi came back even stronger in 2021, along with the rest of the Crypto market.
At this stage of the journey, there is a lot of disappointment regarding DeFi and its performance during the most recent bear market. One of the star performers of the DeFi sector in 2021 was PancakeSwap. The token, CAKE, surged to an all-time high of $44. However, the Crypto Winter has forced CAKE to surrender 97% of its token valuation. This is significant by any standards and goes to show just how devastating this bear market has been for DeFi.
After all, if this is a “flagship” DeFi project… you can only begin to imagine the losses experienced by less prominent projects. There’s no escaping it; DeFi has taken a beating. However, there is still a lot of hope and promise for the DeFi space. Much of this is linked to necessity. Up until now, DeFi has been seen as a type of cash cow. However, it’s becoming more and more apparent that decentralized financial systems and networks are an essential and integral part of the future of finance.
If you are only envisioning DeFi as a cash cow, you might need to expand your school of thought. The future of DeFi is very much tied to maturation and becoming more “sophisticated”. Decentralized financial solutions are critical in terms of the evolution of money. As I say, one needs to think beyond the current expression of DeFi and begin envisioning a world where decentralized solutions are integrated and a part of a more global economy.
An Extensive Journey
In other words, DeFi is unlikely to remain an isolated ecosystem. As it matures, adoption and functionality are likely to increase, ultimately creating an entirely new concept and expression. Currently, DeFi is not taken very seriously, and when you look at the exorbitant losses, hacks, and exploits, you can imagine why. In terms of security and stability, Bitcoin is a lot stronger… and look how long it has taken to see serious institutional investment and approval.
The road ahead requires significant growth and maturation. It’s not so much a case of time but rather that of development. It does not necessarily have to take an extensive amount of time. However, it does require an extensive amount of development and maturation. If this can unfold in a relatively short period, then we can begin to see DeFi taking a more prominent role in the world of Crypto and finance in general.
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Final Thoughts
DeFi is not a temporary disruption but the beginning of an actual financial adjustment or even a revolution. There are multiple expressions of DeFi, and even if we are still in the formative stages, there are already benefits to be had by those who are alert and understand what is busy unfolding. Even Hive is an expression of DeFi! Financial activity and engagement take place in a permissionless environment. Tokens change hands and are traded outside of a third party.
As I have mentioned before, WEB3 and DeFi are synonymous. DeFi is a WEB3-based transaction. To envision a future for WEB3 is to simultaneously envision DeFi as an integral part of that future. I am of the opinion that DeFi still has a lot of surprises up its sleeve. Anyway, catch you next time! All the best!
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.
