DeFi picks up pace as blockchains and alternative NFTs explode

At the end of September, the cryptocurrency markets recovered from the so-called “Curse of September” generously to achieve market capita...


At the end of September, the cryptocurrency markets recovered from the so-called “Curse of September” generously to achieve market capitalization of $ 2.32 trillion. The decentralized finance (DeFi) market is an integral part of this growth. The total locked-in value (TVL) in DeFi protocols increased by more than 20%, from $ 113.5 billion on September 28 to $ 137 billion on October 6, according to The data from Dappradar.

Even the Bank of America (BoA) – a global banking giant – has revealed its bullish outlook on DeFi and non-fungible tokens (NFT). In an October 4 report by BofA Securities – a subsidiary of BoA – the company assessed the reach of crypto assets beyond “just bitcoin”.

(The Strength of Bitcoin) can run automated programs (smart tokens like Ether, Cardano, Solana, and others with blockchains that can do more than securely register payment contracts) like make a payment after an event. This is decentralized finance (DeFi) where smart contracts automate the manual processes of traditional finance, ”says the report.

He also compared tokenization to the early days of the internet and talked about decentralization and tokenization of many aspects of finance as it exists today.

Cointelegraph discussed the rapidly expanding DeFi markets with Johnny Kyu, CEO of the KuCoin crypto exchange. He explained:

“The popularity of the DeFi market is increasing as more and more people begin to understand that a smart contract can be a valid alternative to a traditional bank loan or deposit. The amount of funds blocked in DeFi reflects the market uptake of private investors moving their money from the traditional financial system to decentralized industry. “

While the TVL of the DeFi sector has seen a rise due to the massive increase in the prices of native tokens from various projects, Kyu also attributes the growth to the attractive tariffs offered by DeFi platforms.

A recent report by Dappradar revealed that the TVL in the industry gained 53.45% quarter on quarter in the third quarter of 2021. In September, the Unique Active Wallets (UAW) linked to any decentralized application reached a daily average of 1.7 million . The average quarterly UAW is 1.54 million.

Cointelegraph spoke with Balancer Labs CEO Fernando Martinelli about the importance of the DeFi base established by Ethereum. He said: “A new wave of DeFi projects build on the infrastructure put in place by the first generation, bringing new use cases and more advanced products to experienced DeFi users.

Martinelli said that greater institutional involvement drives TVLs into well-established “safe” protocols. Additionally, the high returns offered by DeFi platforms are moving retail investors from centralized platforms to the DeFi space. This growing adoption by various categories of investors allows DeFi to move to the next phase of its growth.

The next generation

The DeFi ecosystem started on the Ethereum blockchain because of the smart contract functionality it offered. However, several other blockchain networks have since deployed smart contract functionality to their networks via Layer 1 or Layer 2 solutions. The most important of these networks are Binance Smart Chain, Solana, Avalanche, Terra, and Polygon. More recently, the Cardano network has witnessed deployment of smart contracts as part of the Alonzo hard fork.

Even though the growth of these networks could be seen as organic, there is one major issue with the Ethereum blockchain that may have contributed to this growth: gas charges. The EIP-1559 proposal which was part of the London hard fork included the burning of ETH tokens with the goal of ultimately making money for ETH ultrasound, improving scalability, and lowering gas costs.

However, even though the fees are not as absurd as before During the peak of the bull run in May, there have been a few instances in recent weeks where the average transaction fees in the Ethereum network have taken a huge spike. Notably, on September 7 the fee rose to $ 21.29 and on September 27 the price of gasoline hit a four-month high of $ 25.43.

Martinelli said, “There is no doubt that the high gas charges on Ethereum – particularly severe recently due to NFT congestion – have helped spur rapid adoption of other networks. (..) Layer 2 solutions are helping Ethereum evolve, and we’re excited to see the developments underway in this space.

The continued popularity of TVNs is also a major driver of this growth. The aforementioned Dappradar report mentioned that the NFT space has also grown exponentially. In the third quarter, the market generated over $ 10.67 billion in transaction volumes, resulting in a 704% increase from the second quarter and a massive 38.060% increase year-over-year.

While at the start of the year most of NFT’s major sales were in the Ethereum blockchain, now blockchains like Binance Smart Chain, Solana, Polygon, Avalanche, and Tezos are starting to catch up. Recently, an NFT from the largest collection in the Solana ecosystem, Solana Monkey Business, sold for 13,027 Solana (SOL), with a current value of over $ 2.1 million, breaking the platform’s previous NFT record.

Shane Molidor, Global Business Development Manager for the AscendEX crypto trading platform, spoke to Cointelegraph about the potential of NFTs:

“Due to the rapid growth of the market, some may say that the market is a bubble, but I think NFTs offer huge value propositions beyond the mere community of JPEGs or images. NFTs can be used to register ownership of not only digital items, but also collectibles, split assets, and even virtual worlds. “

Errors, bugs and hacks

The rapid expansion of the DeFi ecosystem is not without its setbacks. Due to a combination of lack of understanding and scrupulous players, there have been several exploits and hacks throughout the growth phase.

On September 30, the DeFi Compound Finance Interest Rate Protocol announced that there was a token distribution bug in its new proposal 062. This flaw accidentally rewarded users with $ 70 million in COMP tokens. Following, An additional $ 65 million in COMP tokens are at risk because the code update would not take effect for the next three days due to a time lock. In total, the bug to put $ 162 million “up for grabs”, which makes this an extremely costly mistake. On October 7, the protocol pass a proposal to solve this problem.

In another case of technical error, the cryptocurrency exchange Bittfinex Paid Over $ 23 Million Transaction Fee To Transfer $ 100,000 From Tether (USDT) on the Ethereum blockchain at a Layer 2 subsidiary platform, DiversiFi. However, the miner’s goodwill prevailed when he returned the funds to the stock exchange.

Despite the lucrative nature of DeFi markets, such widely covered hacks, bugs and errors could deter institutional and retail investors. Retail investors are even more susceptible to such financial loss events due to the lack of sophistication and knowledge that institutional investors possess. Thus, they often serve as a benchmark for retail investors. Molidor told Cointelegraph:

“The entry of institutions and retailers into DeFi is almost like a feedback loop. As more and more retail users enter the space and [the] as market capitalization increases, institutions begin to take a closer look at the industry to explore economic opportunities. As institutions enter DeFi, the space then receives more visibility. From this visibility, DeFi enters the mainstream discourse, and once again, more and more retail users are familiar with the economic benefits and rewards provided by DeFi.

But these negative examples are only a small part of the evolution of the DeFi market, which tries to revolutionize finance. The user independence and innovation that DeFi protocols offer investors will only serve to expand the space further.



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Newsrust - US Top News: DeFi picks up pace as blockchains and alternative NFTs explode
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