- What is DeFi?
- Is Investment in DeFi coin safe?
- Latest DeFi trends in 2021
Indeed the year 2020 was for Decentralized finance (DeFi). Just not the exponential growth in the market with new investors entering the system, but we also saw the emergence of new defi projects, defi marketplaces and some amazing uses cases of the blockchain technology. According to experts all of these latest defi trends are yet to continue in the years to come.
Blockchain technology got stung by the bug of DeFi while the world was still anticipating the virus. Many Defi projects flourished in the year 2020 and made their prominent mark by the end of it. The total value of the assets locked in the DeFi protocols was around $19.72 billion which was around $600M at the beginning of the year.
The volume of DeFi exchanges also rose exponentially locking about 15% of the total market by October while it just started with 0.12%. However, the question that comes next is are we expecting any new DeFi trends in 2021? What are the new DeFi projects that will take the market by surprise? Will the latest defi trends be in favor of the investors? Before we get into the depth of the latest trends, we must be thorough with the concept of what is defi.
What is DeFi?
Decentralized finance or DeFi in layman terms makes financial commodities available to everyone through blockchain technology. This system does not require any intermediaries such as banks or brokers to buy and sell defi tokens or cryptocurrencies. It is purely a peer-to-peer system that involves no middlemen and the entire transaction is done through the software. Looking for some in-depth knowledge on the concept? Do we have a detailed blog on what defi is? and the top 5 DeFi tokens to invest in 2021.
Is investment in DeFi coins safe?
Decentralized finance has broken some records despite being in its early stages. While we are here discussing the safety of this technology, the total market capitalization of the defi tokens has increased 88x. The combined value of which stood at $41 billion in March 2021. Indeed the DeFi sector is expanding its horizon. The investors are no longer holding back from investing in the defi coins.
Just like any other technology it has its pros and cons. Although, the fast-paced technological advancements in this sector have combated a lot of challenges there are a few more to tackle such as system failure due to erroneous inputs or compiler errors. However, these minor issues can be easily dealt with.
Pros and Cons of Decentralized Finance
- There are no middlemen or intermediaries.
- No mismanagement or human error.
- Quick access to loans, unlike centralized systems.
- Permissionless operations since the system require no intermediary such as banks in the traditional system.
- Peer-to-peer transfer
- Uncertain: The defi project becomes unstable if the blockchain technology hosting the project shows this anomaly.
- Scalability: Transaction becomes extremely expensive during the time of congestions. They then require a long time for confirmation as well.
- Smart contract issues: Slightest of vulnerabilities in the smart contract can lead to loss of funds.
- Lack of regulations: Although many nations have started to build their regulations around the system, nothing is concrete yet. India has also started to build its regulations around the cryptocurrency market. Why are laws around cryptocurrencies important? Read the fireside chat by Chief Marketing head CoinDCX, Ramalingam Subramanian, for better insights.
Wondering how safe the transactions are? Well, the entire decentralized finance system works on smart contracts. The regulations are based on these smart contracts that govern the rules and regulations around the transactions. The defi marketplaces are one among the many use cases of DeFi that is revolutionizing the world. Looking for the best DeFi marketplaces? The hard work has been done, already!
Having explored the basics, it’s time we dwell deep into the latest defi projects and defi trends we shall witness in 2021.
Latest DeFi projects in 2021 to set new DeFi trends
While we pause to enumerate the remarkable growth of the crypto industry and DeFi at large, we must look forward to the upcoming defi projects and their repercussions. What defi trends can be accelerated in the year 2021? Which innovation or defi token can become the next Aave, Uniswap, or compound?
|Liquidity Mining: The next big revolution|
|Exciting future for Ethereum|
|Leverage Stablecoins: The top DeFi trend in 2021|
|Rise of Decentralized exchanges|
|Gamifying the Blockchain sector|
Liquidity Mining: The next big revolution
One of the biggest crazes that were seen in the DeFi sector in 2020 was Liquidity mining or yield farming. This incentive motivates cryptocurrency investors to lock their defi tokens in the decentralized network. This bootstraps the entire defi protocol along with providing the necessary liquidity.
However, a question also arises about this rapid momentum around yield farming being just a bubble? The year 2021 is expected to be a revolutionary year with more and more generations of automated yield farmers such as yearn.finance and Yfarmers. Both these defi projects make it effortless for the new investors to play a part as well as exemplify the entire market.
There is the emergence of new AMMs to combat the issues arising due to impermanent loss and to incentivize the liquidity provisions.
Exciting future for Ethereum
Ethereum undoubtedly plays a major part whenever decentralized finance (DeFi) is under discussion. Most of the DeFi projects run on the Ethereeum blockchain technology. The year 2020 witnessed the emergence of new ERC20 tokens along with defi projects based on the smart contracts backed by Ethereum blockchain technology. Experts most likely believe that the trend will continue for the next few years while we are discovering new use cases around this technology.
One of the most evolving technology in the cryptocurrency world is cross-chain technology. This blockchain technology allows the transfer of assets, such as crypto coins and defi coins from one blockchain to the other. One of the defi projects playing an important role in this sector is Matic. The functioning of this defi project is based on a sidechain for ethereum. The idea behind this technology is to build an ethereum compatible DeFi multi-chain ecosystem. This shall invariably help traders trade better.
Stablecoins: The top DeFi trend in 2021
The number of stablecoins added in a year amounted to 20 billion dollars. While we speak of them their value has already risen above 26 billion dollars.
Tether USDT having 795 of the market domination, plays a very significant role. Another prominent figure in this stable coin market is Circle USDC. While we have dominant cryptocurrencies in the stable coin market, the US dollar still dominates the entire stable coin market.
However, we can expect the dominating stablecoins to eat the market share once there is a governmental stimulus along with maturing of the market. This is expected to be the top defi trend we shall encounter in the upcoming years. Looking for ways to invest in stable coins? CoinDCX Go is one of India’s simplest and easiest crypto investment app. Here, we have summarised the top 5 stable coins that are safe enough, to begin with.
Top 5 Stable coins to invest in 2021
Price (July 2021)
|True USD (TUSD)||$1.00||$1,530,374,915||1.51%|
|Paxos Standard (PAX) $0.9998||$0.9998||$941,472,490||0.9%|
|Binance USD (BUSD) $0.99||$0.9998||$10,738,488,795||10.6%|
Decentralized exchanges play a major role
The Kraken Intelligence report of 2020 evaluated the prominence and expansion of the cryptocurrency market. The year 2020 was believed to be a year of bull that has set a remarkable standard for all the crypto assets. Digital assets are constantly evolving since the last year and have gained tremendous momentum. Naturally, this has led to the advent of decentralized exchanges.
The wave of acquisition is expected to continue in the year 2021. When it comes to DeFi tokens, around 96% of all locked Ethereum (ETH) are in lending protocols or DEX (Decentralized exchanges). It is expected that DEXs shall control the majority of the shares of various DeFi tokens, pretty soon.
Monetization of the Gaming Industry
The amount of money spent every year by the gaming industry worldwide is $159 billion with almost 2 billion people being associated with it. However, recent years have seen a surge of gaming enthusiasts. One of the amazing innovations that we shall soon encounter in this industry is blockchain gaming. This will not just have a positive impact on the defi tokens and their market capitalization but would also be a great boost for the gaming industry as a whole.
Blockchain gaming is based on the concept of completion of simple tasks that help the gamers to mine their defi tokens and coins. Once the industry starts monetizing, we shall require defi protocols to ensure in-game transferability.
One of the pioneers in this sector, BitSport, has already started its sponsorship program for crypto enthusiasts to sponsor game tournaments. The upcoming years will see a rise in more such gaming platforms and defi projects. These projects can then become the top defi projects of 2021. This new trend of engaging gamers in the world of blockchain will indeed open new doors for the upcoming defi tokens.
Another trend that we have seen in the gaming industry is around non-fungible tokens (NFTs). Many celebrities have started to come up with their own NFTs. The total market cap of the NFT market rose by 1785% in the year 2021. Many NFT projects have been sold for more than $70 million. OpenSea, a defi marketplace, saw new sellers on their platform once it supported CryptoPunks and HashMasks recording cumulative sales of $100 million across more than 50,000 users.
With the advent of so many new trends around blockchain technology, indeed the year 2021 is going to be exemplary. DeFi shall secure its presence by expanding and extending its community in various sectors. Experts say the upcoming years are going to be in favor of the latest defi trends that are being set in the present year.
We have more reasons than ever to engage with the latest defi projects and understand what drives these latest defi trends to leverage our investments. Crypto enthusiasts and investors have already started to make the best of their existing knowledge to invest in the latest defi projects.
But, are we prepared for these defi trends? It’s time we expand our horizons and make the most of our knowledge before the ship leaves the harbor. Eager to stay updated about the latest cryptocurrency news and defi protocols? CoinDCX blog is the one-stop platform for all doubts. We also have our very own cryptocurrency course, DCXLearn, for all beginners and advanced players in the market.
Analysts suggest that these defi trends are about to bring in revolution, the foundation of which has already been laid. Looking for a quick peek at the bitcoin prices? CoinDCX Go, the best crypto investment app in India, is the simplest and safest tool for anyone interested in crypto.