The advent of cryptocurrencies and with it, Decentralized Finance has taken the world by storm, with the numerous use cases being churned out by the day. Cryptocurrencies and the underlying technologies have evolved over time with new project modifications with the utmost target of completely overhauling what traditional finance has to offer.
One of the new inventions of blockchain technology is decentralized finance (DeFi), a term that is arguably not new in today’s crypto space owing to the traction it has garnered. Decentralized finance encompasses the creation of financial products, governed by smart contracts or unique codes built atop public blockchains like Ethereum.
Decentralized Finance is a direct threat to what financial institutions and centralized monetary authorities are providing as flexible products such as loans which would require much vetting in traditional finance can easily be accessed in DeFi. Other services such as savings and staking to earn interests or passive incomes are also redefined in the world of decentralized finance as they come with higher interest rates.
Many investors are embracing DeFi as well as other opportunities associated with the new financial ecosystem. Defi platforms including Aave, Maker, Compound, and Synthetix amongst others all have associated network tokens which have been a delight of retail investors beginning in the past year.
Past, Present, and Future Prospects of DeFi Tokens
Just like Bitcoin (BTC), decentralized finance platforms offer their tokens as assets with the possibility to grow based on demand and utility. As such, these tokens remarkably surge in value over time. A perfect example is Polkadot, and the associated token (DOT), with a quoted Return on Investment (ROI) of 1233.93% according to CoinMarketCap. This is unlike anything that has been seen in recent years by any publicly listed market of barely a year old.
Decentralized finance tokens have a huge prospect which many did not realize until last year. At present, the tokens are showing resilience and some are parting ways to shield themselves from being correlated with Bitcoin amidst unprecedented price swings.
DeFi tokens have been quoted to have a bright future prospect, as many of their underlying projects are yet to unlock their utmost use cases and mainstream adoption. When these elements are fully present, the appreciation for this group of digital tokens will be heightened.
Enough Rooms To Grow
Decentralized finance currently has about $41.07 billion in total value locked (TVL) according to analytics platform DeFi Pulse, and the market capitalization of all known tokens is just a fraction of the global crypto market cap.
While the entire cryptocurrency ecosystem is at best described as a nascent investment space, decentralized finance is particularly at an infantile level that many will well be positioned in the future to back the technology today.
To tap the underlying potentials of the technology, developers are also potentially in a good position to swarm in, building innovative platforms with products and services that can challenge the redundancies in our world today.
Recommended Ways To Achieve This
There are unique aspects that DeFi can specifically focus on to channel its future growth, and this includes but not limited to;
- The formation of a DeFi Consortium
- Emphasizing and developing specialized values beyond token offerings, and;
- Driving a global outreach with products
At the rate at which there is a proliferation of DeFi projects today, there is the need to establish a cross-boundary consortium, a body that will be tasked with sieving the true game-changing innovations in the space from opportunistic ones. While the function of the consortium may be more diversified, a body to certify projects may guarantee better trust amongst prospective adopters.
There is an ongoing shift in focus from the unique products and services that a decentralized finance project can offer to the native tokens projects launches. Tokens contrary to the observable trends are not the end, rather, they offer a way to ensure the smooth running of the Decentralized Autonomous Organizations (DAO) that most DeFi platforms claim to. Project developers should think through ways to emphasize the problems they are solving beyond the tokens and their appreciative value.
While adoption is essential for DeFi platforms, a general growth of the emerging ecosystem can be better driven when the focus of each existing and emerging product is to address the needs of users around the globe, barring the nations that have unfavorable regulations coverings such new innovations.