Dozens of industry experts answered: Is 2020 the "Year of DeFi"? What to expect from the crypto industry in 2021?
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Cointelegraph Chinese (ID: CointelegraphChina)
Cointelegraph Chinese (ID: CointelegraphChina)BTC, Author: MAX YAKUBOWSKI, reprinted with authorization by Odaily.
Experts in blockchain technology and cryptography answer that question.
Figuring out where to start in decentralized finance almost always ends in a rhetorical debate. Some believe that ten years ago Bitcoin () marked the beginning of DeFi, as this major cryptocurrency was the first peer-to-peer digital currency and represented the conceptual heart of DeFi. Some believe that DeFi got its start as early as December 2017 with the launch of Ethereum-based protocol MakerDAO, followed by Compound Finance and Uniswap in September and November 2018, respectively. On the other hand, it is no exaggeration to say that the real rise of DeFi began this year.Since the beginning of this summer, the total value locked in DeFi has risen sharply, exceeding $14 billion this month, which undoubtedly makes the DeFi field one of the most discussed topics in 2020. As expected, there were supporters and critics.Although DeFi is one of the hottest topics this year, some people still believe that in the global financial field, DeFiStill basically a niche financial tool
. Unsurprisingly, the rapid growth of capital flowing into the DeFi space has led some to compare DeFi to the initial coin offering boom of 2017 and predict the possibility of its failure. At the same time, some people think that multiple projects in the DeFi fieldnot really decentralized, nor does it represent the true concept of DeFi.Other concerns are closely related to the ethereum network's transaction fees, which have been hit several times this yearreach the highest level, calling into question the long-term sustainability of the network. but。
Blame high gas fees on DeFiper se are incorrect, as they are also influenced by the way institutions store and secure digital assets. One solution could be for DeFi productsUnlocking a $250 Billion Bitcoin VaultWhile the concept of DeFi itself is promising,There are also some pitfalls, significant financial risk andsome technical risks
. it seems veryIt is necessary to improveThe underlying infrastructure of most decentralized applications.In the long run, decentralized finance has the potential to change our world as 1.7 billion people stillImpossible to Gettraditional financial services. Returning to the debate about the origins of decentralized finance, it can be said that DeFi。
, becoming the second step in the evolution of decentralization, it is possible
Solving the problem of financial inclusion
As 2020 draws to a close, Cointelegraph reached out to experts in blockchain technology and crypto to get their take on the “Year of DeFi.”
secondary title
How will DeFi affect the encryption industry in 2020? What expectations do we have for the DeFi field in 2021?
Block.one CEO Brendan Blumer:"
“Decentralized finance has certainly been one of the most intriguing headlines this year. The influx of billions of dollars into the ecosystem underscores the widespread interest in DeFi; however, this surge in attention has also drawn attention from regulators More skeptical, they want to understand the limitations and feasibility of DeFi applications.
At Block.one, we believe we must evolve to achieve a sustainable connection from DeFi to the traditional economy and create a more open financial system. We call it Open Programmable Finance (ProFi). We see ProFi as a bridge from the transparent and honest EOS blockchain to the regulated financial world.
A key difference between DeFi and ProFi is that ProFi businesses incorporate risk-based, permissioned trading permissions based on regulation and compliance. Crypto compliance and regulatory frameworks are rapidly taking shape and maturing. The real winners in the digital economy will be those that take the long view and take the time to ensure that their products comply with judicial and professional services requirements.
Brian Brooks, Acting Comptroller of the Currency, U.S. Treasury Department:
“Decentralization is one of the two forces reshaping financial services. Along with the three traditional core banking activities of lending, payments and deposits, decentralization is changing the way we consume financial services and the way we operate banks. My The view is that we're still at the beginning of a longer game with many benefits and advancements to come."
Neo founder, Onchain founder and CEO Da Hongfei:
“While blockchain-based financial solutions are nothing new, this year we have witnessed exciting innovation breakthroughs in DeFi, from exciting new protocols to improved cross-chain asset bridges.
Looking ahead, I think it's clear that the blockchain space has embraced decentralization and interoperability, and I believe both will grow rapidly in the coming year. Through cutting-edge interoperable protocols like Poly Network, we are laying the foundation for the smart economy of the future, a truly global and borderless world. "
Dan Simerman, Head of Financial Relations at the IOTA Foundation:
“I agree that 2020 is the year of DeFi, mainly because of the dominance of DeFi projects in terms of technological innovation and development. I would also say that DeFi has shown the crypto space that innovation is still possible and that new projects can still be developed in novel ways.” Channel liquidity, funding and participation. After the end of the ICO boom in 2017, it was believed that it would be difficult for new projects to find their footing in a market that prioritized private financing over crowdfunding innovation. Thanks to the tools, we will see more innovations in the coming months.
In 2021, we will see some core innovations, such as lending and liquidity mining, penetrate into financial applications that we would not consider. Entrepreneurs, developers, and companies looking to opt for blockchain will want these core components as part of their DApp development toolbox. The financial instruments we consider in 2020 will become actual requirements for blockchain and ecosystem selection in 2021. We might even see some of the core innovations in DeFi find their way into centralized finance. "
Denelle Dixon, CEO and Executive Director of the Stellar Development Foundation:
"“I see a lot of attention and headlines on DeFi across our industry in 2020. But even though the term is everywhere these days, I think DeFi means a lot of different things to people, There are also a lot of different transformations in existing and emerging projects. So it is difficult for me to classify this year as a whole as the year of DeFi, but I do think that the DeFi boom has brought a lot to the blockchain and crypto industry New talent and interest, which is great for the industry. On Stellar, you can already do a lot of things that fall into the DeFi category.
Still, I think it raises important considerations for all of us, why DeFi is getting so much attention, and whether we can make adjustments to ensure we meet those needs. "
Emin Gün Sirer, CEO of AvaLabs, professor at Cornell University, co-director of IC3:"
DeFi on Ethereum has grown rapidly this year, building a vibrant community of applications and users. But at the same time, the hacks and scams we’ve seen highlight how much work the community still has to do, while the sheer volume of transactions shows the limits of DeFi on Ethereum 1.0.
Network congestion has pushed fees to new highs, which also creates systemic risk. High leverage and mortgage lending largely drives the market. In the case of large price swings, we saw a domino effect of liquidations being triggered as users were unable to provide collateral or exit positions.
The main problem here is that layer1, where DeFi activity takes place, is too crowded. I think that will change with the introduction of new, scalable layer 1s such as Avalanche. We will start to see DeFi expand further.
Heath Tarbert, Chairman and CEO of the U.S. Commodity Futures Trading Commission:
“The emergence of DeFi, a growing global trend, highlights how innovation continues to reshape the financial services sector. By combining multiple technologies to deliver financial services in new ways, DeFi has the potential to provide a way to bring financial markets ready It is a new way of looking at finance that draws on and reflects the new ways we all interact.
We can't just think the old way, go to a bank or brokerage firm that you've known for years, especially if you want to expand access to financial markets and financial services. Historically, innovation has driven our markets forward and has been the key to their success.
I think, as a regulator, we should expect DeFi to develop and grow. Each regulator will need to work to determine how DeFi fits within its own jurisdiction. In the absence of regulation, the industry will need to figure out how to ensure market integrity and consumer protection. These are areas for regulators to focus on going forward. "
Jimmy Song, Blockchain Programming Guide:
“It’s definitely the new scam vehicle. We haven’t seen a flood of scams like this since the ICOs of 2017-2018. Of course, this is nothing new, with altcoins in 2011 and token sales in 2013-2014 That proves it. As far as what benefits it adds to the ecosystem, I am deeply skeptical. If in 3 years, DeFi proves that it is not a zero-sum game that benefits those who create tokens, I will reconsider.
I expect 2021 to be about the same as it is now, because it's hard to realize that all these things are of little use. I expect this trend to finally come to a screeching halt by 2022. "Joseph Lubin, co-founder of Ethereum and founder of ConsenSys:“The value of DeFi protocols rose from $675 million to nearly $15 billion in one year, proving that DeFi (open decentralized finance) is headed for a big year. However, it’s not just a new exciting Exciting use cases for crypto. It’s a collection of entire decentralized finance ecosystems, the building blocks of which have been around for a few years. Many in our field refer to these as Lego bricks or composable open source systems that allow anyone to Access to more complex financial applications. It starts with collateral-backed stablecoins (DAI), stablecoin lending, and ways to trade efficiently without going through centralized exchanges (automated market makers like Uniswap and 1inch). We What we are seeing now are new financial innovations such as insurance agreements, asset management platforms and even flash loans.
MetaMask, our wallet and gateway to DeFi apps, has improved the user experience over the past few years, making it easy for anyone to switch accounts and grant permissions only to apps and websites you trust. Their mobile app also makes it easier for DeFi apps to reach a wider audience,
It is estimated
, this group is close to 2 billion people, accounting for about 60% of Internet users. More than 65% of MetaMask Mobile test users are from outside of North America and Europe, where mobile apps are very common. We’ve heard from users that using MetaMask Mobile makes it easy for individuals to exchange crypto tokens, sell NFT artwork, and earn interest on posting collateral — all from a single phone.
When ConsenSys was founded, there was no real ecosystem, infrastructure, and development tools. Today, development tools like Truffle serve millions of developers who want to build their own applications. Infura supports more than 130,000 developers by providing node-optimized cloud infrastructure, making it easier to deploy applications without running the infrastructure. And, our audit team, ConsenSys Diligence, is making sure smart contracts are tested and secure before deployment. All of this has contributed to the rise of DeFi, as it is easier for developers to launch a project on a vibrant open source ecosystem.
I predict that there will be a trend in 2021, that is, institutional money and professional traders will increasingly want to enter the DeFi space. To that end, we built an institutional version of MetaMask and started getting custodians and professional traders to integrate MetaMask into their technology so they can gain exposure seamlessly.
In my opinion, the global macroeconomic trend of low interest rates (even negative interest rates) will mean that DeFi will become more and more relevant to ordinary people. It's not just tech and finance nerds who will find this interesting. If bank accounts provide many different functions, make borrowing easier, allow more people to participate in the upside of the market, and even provide higher yields, we can see more people moving to the decentralized finance track. As long as the traditional financial world keeps crashing, people will be pushed in our direction.
I'm also looking at how games will be the catalyst for the introduction of Ethereum-based NFTs for consumers. "
Mance Harmon, Co-founder and CEO of Hedera Hashgraph and Swirlds Inc.:
"The rise of DeFi in 2020 has laid the foundation for companies to embed financing directly into business processes. Although the DeFi bubble in 2020 looks similar to the ICO boom in 2017 in some respects, the fundamentals of the DeFi movement will change the future of finance. face.
DeFi will make the traditional financing business of enterprises, governments and individuals faster and cheaper. It will transform every financial transaction we make as organizations, and our personal lives. "
Meltem Demirors, Chief Strategy Officer of CoinShares:
“A lot of things in the financial industry are based on two core concepts: securitization and lending. The crypto industry has been involved in securitization and lending from the earliest days, and with the advent of colored coins and the ERC-20 standard, this has been made easier, And securitization has been achieved through tokenization; asset-backed lending markets have also developed, and holders of Bitcoin and other highly liquid cryptocurrencies can use their holdings to obtain cash and obtain additional leverage.In 2020 In 2019, securitization and leverage found a new medium—DeFi, effectively migrating these activities, traditionally coordinated by trusted intermediaries such as banks, brokers, and asset managers, to a peer-to-peer, blockchain-native medium In practice, trusted intermediaries, such as contracts governing DeFi projects, are effectively replaced with verifiable technology in the form of open-source code.
DeFi is one step in a journey that many of us in the industry see as inevitable — securitization, lending, and many core financial functions performed by banks and other intermediaries can be effectively migrated to low-trust crypto-native technologies. With millions of people around the world owning billions of dollars in crypto assets, the development of markets around making these assets financially productive is inevitable. We have invested time, energy and capital in the DeFi space and look forward to continuing to do so in 2021.
Financial institutions aren’t quite ready for DeFi yet, but there’s no doubt they will be looking to replicate their existing business models (and associated revenue) with cryptocurrencies as collateral. We would like to see more regulatory pressure, hence more projects created by anonymous developers, and the emergence of stablecoins without any single point of control, such as Empty Set Dollar (ESD) or Basis Cash (BAC), which is Two early coins in this space. We expect to see more assets being synthesized, i.e. securitized, and offered as collateral on-chain, and we expect to see a stronger interest rate market that begins to price risk and maturity across the DeFi space.
Ultimately, leverage is the medicine, and the industry will continue to innovate in order to keep capital flowing freely. In the absence of money printing, innovation will continue to drive liquidity in the trading ecosystem, and demand for capital and leverage continues to outstrip supply, which will drive further asset securitization and tokenization as businesses begin to explore more esoteric Collateral types and under-collateralization may even be unsecured loans. "
Michael Zochowski, head of DeFi at Ripple:
“2020 may not be the year of DeFi, but it is definitely the beginning of the year of DeFi. Within the crypto community, DeFi is the hottest topic because we are starting to see its potential, but we have not seen it leap into the mainstream because Most of the current users are those who are already involved in the crypto space. For DeFi to escape the bubble, we need to see it establish strategic partnerships with traditional players such as financial institutions or fintech.
History repeats itself. As we saw with the altcoin boom of 2017-2018, many projects will fail, merge or be acquired, including some of the darlings of 2020, as we have already seen. Projects with real utility will win a place in the crypto space. The most successful will likely be simple applications that replicate basic financial services, such as synthetic assets and decentralized exchanges.
With significant improvements in performance and cost, new DeFi platforms will gain more and more attention. Expect more sidechain projects, bridges between networks and smart contracts to build momentum on the new network. As these new systems emerge, interoperability and efficiency will become even more important. With Eth2 still a few years away, I expect at least 25% of the value of DeFi deployments to be on networks other than Ethereum by the end of 2021. "
BitGo CEO Mike Belshe:
"This year, DeFi has become a household name, at least a term recognized by most financial circles. BitGo has been involved in DeFi for a long time. One of our products - Wrapped Bitcoin (WBTC) was launched in January 2020 and is now available in the entire Widely used in DeFi. In less than a year, the market cap of WBTC has risen to $1.6 billion.
BitGo is the sole custodian of WBTC. This means we guarantee the security of every bitcoin deposited into WBTC. For every 1 WBTC, 1 BTC is safely stored in the BitGo vault.
The core advantage of WBTC lies in the transparency and verifiability of the system, coupled with BitGo's security record, which enables it to attract institutional and retail users, and has established a large amount of liquidity, and its market value continues to grow.
We are confident that DeFi applications and use cases will continue to gain momentum in 2021. We will see innovations from decentralized lending to staking and insurance built on top of DeFi infrastructure even without our participation. Different blockchain communities have exciting use cases far beyond what the technology was originally designed for. The limitless potential of this new development is why we are so passionate about building in this area. "
Paul Brody, Blockchain Technology Leader and Global Innovation Leader at Ernst & Young:
“DeFi is amazing and exciting because the truth about smart contracts is that most of them aren’t very smart. Historically, they’ve been little more than registers of asset ownership. With the advent of DeFi, We have gone from nothing to self-innovation, so we are getting closer and closer to the goal of truly realizing smart contracts. We are now entering an exciting and scary era, smart contracts will transfer assets and funds in an automated way, they Will be hacked and exploited, we have to learn how to manage these risks while creating value. We have seen this, but in 2021, it will be further advanced. I hope that by 2021, we will not only see DeFi contracts mature , and also see a shift in DApps towards what we call Zapps (Zero-Knowledge Applications), privacy-focused versions of DApps that businesses can use. I think we'll also see a more serious approach to auditing and security. Finally , I hope that in 2021, we can see the emergence of decentralized applications other than finance. Decentralized operations, business systems and infrastructure are all ahead of us, applying the concept first deployed in DeFi to a wider range of services and systems, from survival to manufacturing to procurement."
Roger Ver, CEO of Bitcoin.com:
“Like cryptocurrencies in general, DeFi is just getting started. It’s just another field enabled by Satoshi’s invention.
Cryptocurrencies, tokens, decentralized crowdfunding like Flipstarter, ICOs, and more are now possible. This ecosystem is just getting started and we are all lucky to be a part of it. "
Blockstream Chief Strategy Officer Samson Mow:
“If we define 2020 in terms of hacks and failures, 2020 is the year of DeFi. Like Ethereum, DeFi made some people rich and many people lost. I expect 2021 to be similar to now. "
