- Despite the problems that the crypto market has had, Decentralized Finance has come out ahead, making the scalability of DeFi solutions far exceed that of traditional financial services.
- According to Hashkey Capital’s Defi Ecosystem Landscape Report, DeFi protocols are robust enough to survive events like the Terra Luna/UST collapse.
- Despite its positioning, digital currency trading volumes, along with DEX activity, decreased, as did the TVL.
This 2022 has been a very turbulent year for digital assets, due to a large extent to the bearish period that occurred throughout the year, known as crypto winter, which left several firms out of the game and others almost left them stranded. the floor, with very little opportunity to recover
Although the crypto market reeled with the fall of TerraUST and LUNA, one of the hardest blows came from FTX after its collapse, giving the coup de grace to the credibility of the crypto assets and setting off several alarm bells from the cryptocurrencies. Regulators, fiercer than ever, have started calling for stricter regulations and rules for cryptocurrencies.
Although the outlook looks grim, not the entire ecosystem is “ant-coloured”, since decentralized finance (DeFi) proved to have much better potential than the traditional financial industry, despite the aforementioned setbacks, according to a new report from Hashkey Capital
“Within 2 years of its inception, DeFi’s TVL has reached a size comparable to a medium/large bank in the US. These are the first signs that DeFi may surpass a small but significant portion of the global financial sector’s TAM of $8 billion”, spoints to a report by the firm on the DeFi ecosystem.
DeFi, a strong ecosystem
According to the year-end report from the cryptocurrency-focused investment firm Hashkey Capital, the scalability of DeFi solutions already exceeds many times that of traditional financial services.
“Considering the decentralized and autonomous nature of DeFi applications, its business model is highly scalable. We have seen cases where a smart contract developed by a single developer processes billions of dollars in transactions. DeFi has the potential to be many times more scalable than the traditional financial industry and more scalable than traditional models. [software como servicio (SaaS)]”, indicates the report.
Speaking of figures regarding wallets, the report indicates that there are around 5 million of these interacting with DeFi and their year-on-year growth has exceeded 100% last year. Taking these figures into account, DeFi could enter the Top 10 of the main banks in the United States
“At its high point ($179 million TVL), DeFi would be the 20th largest bank in the US.”, the report states.
DeFi a strong market
In addition to the potential for decentralized finance to continue to grow, recent crises in the market have helped show that DeFi protocols are robust enough that they can survive black swan events like the Terra Luna/UST collapse.
The fall of the two Terra Labs projects wiped $20 billion of TVL from the market severely affecting CeFi institutions that were directly or indirectly exposed to the Terra ecosystem, leading many to bankruptcy such as Celsius, Three Arrows Capital and voyager.
As the CeFi ecosystem fell, the DeFi demonstrated great resistance to times of crisis or great volatility in the market passing the turbulence of Terra without a scratch.thanks to the fact that they can trigger liquidations to keep the protocol and liquidity providers in a healthy state.
TVL decrease
However, in the report entitled Defi Ecosystem Landscape ReportHashkey Capital, noted that unfavorable conditions in the crypto ecosystem this year contributed greatly to the decline in the value of total assets under management.
Likewise, the aforementioned document indicated that the value of collateral offered in DeFi funding is reduced by declining digital asset prices, reducing the incentive to borrow against such collateral.
Also Digital currency trading volumes, along with DEX (decentralized exchange) activity declined.
for his part the TVL (Total Value Locked) which in December 2021 managed to place itself above $180 billion dollars in December 2021, dropped from approximately $150 billion reported in May 2022, to just over $50 billion at the end of October.
DeFi growth slowdown
Despite this reduction in TVL, the aforementioned report affirmed that some segments of the Decentralized Finance market continue to have a promising trajectory.
Thus, in relation to the degree of adoption, the report acknowledged the existence of a slowdown in the growth rate in 2022 (31%)especially if a comparison is made with the same period last year (545%).
Having said all of the above, this 2022 It could be considered a year of consolidation, with most projects focused on creating and improving their products instead of allocating resources to marketing initiatives.
Likewise, this year the user interface of the DeFi protocols, in addition to the general usability, presented significant improvements, which has made it possible today to confirm that using various DeFi protocols is easier and simpler than using a banking application. at home.
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