DeFi made a lot of heads turn last year witnessing tremendous growth. Since it provides a variety of services that are more efficient and profitable than the traditional financial system, it has a strong future ahead.
Let Us Look Deeper Into 2021’s Predictions for DeFi
The upgradation of the Ethereum network to Ethereum 2.0 will make it stronger and reduce the gas fees and chances of congestion. This will lead to more DeFi applications being built and also lead to efficient cross-chain interoperability. Other blockchain networks such as Polkadot and Cosmos are aggressively working on this aspect.
The need for insurance will increase due to more number of assets locked in different DeFi applications. Users will aim to reduce their risk exposure to safeguard themselves against different contingencies. Nexus Mutual, Etherisc, and Cover Protocol will be the leading players in this field. Emerge DeFi is also gaining strong momentum by serving as a token launchpad and for auditing DeFi insurance protocols.
Derivatives trading will rise as they are risk-free trading instruments and can be used effectively for hedging against various market uncertainties.
More investors will divert their funds from money markets and stock markets to cryptocurrencies and blockchain-based platforms.
The demand for flash loans, automated market-making, decentralized asset management, and yield farming will skyrocket this year.
Liquidity pooling used by platforms like Uniswap will earn more profits and provide consistent revenue for the liquidity providers. The chances of impermanent losses and slippages are reduced.
Remme, a distributed Public key infrastructure (PKI) will provide more security for DeFi projects through passwordless authentication, signature hash algorithms, and by using the Internet of Things (IoT). The platform will witness huge demand this year as many organizations want to sort out the issues faced in Web 3.0 applications.
Staking will be done by more investors providing more liquidity for the holders of tokens. Liquidity providers are also minting staked tokens representing various synthetic assets and stablecoins leading to better opportunities to earn more returns.
As seen above, DeFi will progress faster in 2021, break new records, and Cryptocurrencies will be seen as a viable investment avenue. More work needs to be done on passing friendly regulations, reducing the technical risks, and enhancing the transaction speed.
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