As September drew to a close, cryptocurrency markets recovered from the so-called “September Curse” with a market capitalization of .3 2.322 trillion. The Decentralized Finance (DFI) market is an integral part of this growth. According to Dapadar, the total value locked in the DFI protocol (TVL) increased by more than 20% from 28 113.5 billion on September 28 to 13 137 billion on October 6.
Even the Bank of America (BoA) – a global banking giant – has expressed its bright views on DFIs and nonfangible tokens (NFTs). A subsidiary of BOA – BOFA Securities – in its October 4 report – assessed the scope of crypto assets outside of “Bitcoin only”.
(Power of Bitcoin) can run automated programs (smart “tokens such as Ether, Cardano, Solana, and others including Blockchain who can securely record payment agreements) such as paying after an event. Its decentralized finance (DFI) is where smart contracts automate the manual process of traditional thematic financing, ”the report said.
It compared tokenization to the early days of the Internet and spoke of the decentralization and tokenization of many aspects of money as it currently exists.
Cointelegraph discusses the rapid expansion of the DFI market with Johnny Q, CEO of the crypto exchange KuCoin. He explained:
“The popularity of the DFI market is growing as many people are beginning to realize that a smart contract can be a viable alternative to a traditional strategic loan or bank deposit. The amount of funds locked into the DFI reflects market acceptance among private investors who are shifting their money from the traditional financial system to a decentralized industry.
TVL in the DFI sector has seen a push from the massive increase in the price of domestic tokens in various projects, but QU defies this increase due to the attractive rates offered by Defy platforms.
According to a recent report by Dapadar, TVL in the industry gained 53.45% in the third quarter of 2021. In September, the Unique Active Wallet (UAW) connected to any decentralized application hit an average of 1.7 million hits daily. Quarterly average UAW 1.54 million.
Cointelegraph spoke with Fernando Martinelli, chief executive of Balancer Labs, about the importance of the Ethereum-based DFI base. “A new wave of DFI projects is being built on top of the infrastructure that the first generation has built, bringing new uses and more advanced products to DFI power users,” he said.
Martinelli said greater institutional involvement was driving TVLs into well-established “secure” protocols. Furthermore, the large yields provided by DFI platforms are shifting retail investors from a centralized platform to the DFI space. This growing acceptance among different categories of investors is enabling DFI to move to the next stage of its growth.
The next generation
The Defy ecosystem was started in the Ethereum blockchain because of the smart contract functionality it provided. However, other blockchain networks have established smart contract functionality at its level through Layer-1 or Layer-2 solutions. The most notable of these networks are the Benson Smart Chain, Solana, Avalanche, Terra and Polygon. Most recently, Cardano has witnessed the establishment of smart contracts as part of the network Alonzo Hard Fork.
Although the growth of these networks can be considered organic, the Ethereum blockchain has one major problem that may contribute to this growth: gas fees. The EIP-1559 proposal, which came as part of the London Hard Fork, included efforts to make ETH token burning UTH “ultrasound money”, improve scalability and reduce gas fees.
However, while the fees weren’t as unreasonable as they were when the bulls ran in May, there have been some examples in the past few weeks where the average transaction fee on the Ethereum network saw a huge increase. Significantly, on Sept. 7, the fee went to 21 21.29, and on Sept. 27, gas prices hit a four-month high of 25 25.43.
Martinelli said, “There is little doubt that the high gas fees in Ethereum – especially due to the recent NFT congestion – have helped accelerate the adoption of other networks. .
The continued popularity of NFTs is also a significant driver of this growth. Dapadar’s aforementioned report noted that NFT space has also increased exponentially. In Q3, the market generated trading volume of more than 67 10.67 billion, a 704% increase from the second quarter and a massive increase of 38,060% per year.
At the beginning of the year, most NFT sales were in the Ethereum blockchain, now blockchains like Benson Smart Chain, Solana, Polygon, Oblanche and Tejos are starting to catch up. Recently, an NFT from the Solana ecosystem’s largest collection, Solana Monkey Business, sold to 13,027 Solana (SOL), currently more than $ 2.1 million, breaking the platform’s previous NFT record.
Shane Mollider, global head of business development for cryptocurrency platform AscendEX, spoke to Cointelegraph about the potential of NFT:
“Because of the rapid growth of the market, some may say that the market is a bubble, but I believe that NFTs only offer huge value beyond the aggregation of JPEGs or images. NFTs can be used to record not only digital items, but also collectible, fragmented assets and even ownership of the virtual world.
Mistakes, bugs and hacks
The rapid expansion of the DFI ecosystem is not without its pitfalls. Due to a lack of understanding and a combination of intelligent players, there have been several exploits and hacks throughout the entire period of growth.
On September 30, DFI Interest Rate Protocol Compound Finance announced that its newly implemented proposal 062 contains a token distribution bug. Next time, another $ 65 million COMP token is at risk because the code update will not be effective for the next three days due to time-lock. In total, the bug has put 16 162 million “to catch”, making it an extremely costly mistake. October 7, Protocol Pass A proposal to solve this problem.
In another instance of a technical glitch, the cryptocurrency exchange Bitfinex paid a transaction fee of more than $ 23 million to transfer $ 100,000 Tether (USDT) in the Ethereum blockchain to a Layer-2 subsidiary platform, Diversify. However, the miner’s goodwill prevailed because he returned the funds to the exchange.
Despite the lucrative nature of the DFI market, widely covered examples of hacks, bugs and errors can serve as a deterrent for institutional investors and retail investors alike. Retail investors are more susceptible to such incidents of financial loss due to lack of sophistication and knowledge of institutional investors. Thus, they often serve as a benchmark for retail investors. Molidor tells Cointelegraph:
“Institutional and retail access to Defy is almost like a response loop. The more retail users enter the space and [the] As market caps increased, organizations began to examine the industry more closely to explore economic opportunities. The space is given more visibility as organizations enter Defy. From this visibility, DFI enters the mainstream discussion, and again, more retail users become familiar with the benefits and economic rewards offered by DFI.
But these negative examples are just a small part of the picture evolving in the DFI market, which is trying to revolutionize money. The innovation that the DFI protocol gives to user freedom and investors will only serve to further increase the space.