The Continued Growth of Decentralised Finance
It’s no secret that NFTs have dominated the crypto landscape over the past 12 months, but that doesn’t mean that they’re the only topic of interest for those of us operating within the industry. Another key point that has been in the spotlight due to an increase in use cases, demand, and applications in DeFi, otherwise known as decentralised finance. Even though some market observers had anticipated the popularity and use of DeFi a long time ago, the rapid adoption by both traditional and crypto-native players has attracted the attention of the wider financial markets. . The DeFi ecosystem has been evolving in the background, improving, adapting, and reacting to user demand to become a more flexible and easy-to-utilise piece of technology across a number of different industries.
In this article, we’re going to take a closer look at DeFi and the expert predictions for 2022, giving you a clearer image of how decentralised finance may grow in the coming year. If you’d like to continue learning about DeFi, be sure to continue reading on below, or alternatively check out our Insights section to dive deeper into the latest news, trends and developments that are happening in the crypto industry right now.
Here’s What You Need to Know About Decentralised Finance
The decentralised finance movement encompasses applications and protocols based on blockchain technologies, such as Ethereum and Solana, with programmable capabilities. Smart contracts, which include the agreement of the deal, enable the transactions to be carried out automatically on the blockchain. Studies indicate that decentralised finance has only captured 5% of the crypto space, but it has seen massive growth recently that may lead to this level of reach increasing in the near future. In June 2021, DeFi assets in the crypto market were worth $93 billion, up from $4 billion in the space of just 3 years.
One of the reasons blockchains are so difficult to attack is they are decentralised. Since no one party controls the blockchain network, it is almost impossible for someone to change the rules governing it. Even if a government manages to shut down a bunch of computers, bitcoin continues to function because other computers on the network not only keep a record of transactions but can run the system on their own.
This concept is taken a step further by DeFi. In 2013, Canadian-Russian programmer Vitalik Buterin proposed a blockchain network, Ethereum, for decentralised exchanges and lending. Ethereum’s blockchain was developed to host programs, as opposed to the bitcoin blockchain, which kept track of bitcoin transactions as its sole function. Ethereum can be considered as a decentralised computer platform for the development of applications (dApps). Ethereum’s processors receive Ether in exchange for their processing power, which is now the second-most valuable digital asset behind bitcoin.
DeFi organisations are decentralised in the way they make their decisions. When a decentralised application first begins, only one person or a few people might drive the project; however, as the project gains momentum, they often step aside, handing control to the community that uses it, which helps to retain validity and avoid problems arising. Decentralised autonomous organisations (DAO) may be formed to carry out this transition, which would have its rules and regulations embedded in program code and could issue governance tokens to give holders of those tokens a say in decision-making.
The ability for two users to make direct digital payments was one of bitcoin’s key innovations. Paper and metal money can be used in this way in the physical world, but until bitcoin became a reality, the only way to do so electronically was to use a bank transfer or a payment service like PayPal. As a peer-to-peer payment system, bitcoin was imagined to work around this. In essence, this is where the blockchain becomes so important to the future of the cryptocurrency industry. As digital transactions become more and more prominent, the ability to track, monitor, and validate transactions as they happen will be a necessity for all parties involved – without this verification, security and governance issues become a huge roadblock to progress.
Entering the Crypto Industry as a BCB Group Partner
BCB Group has a wealth of experience in the fintech and cryptocurrency space, which enables us to facilitate the creation of the best possible ecosystem for institutions.
As a BCB Group customer, you can use our BLINC payments network to instantly send or receive payments to other parties in the BCB Group client ecosystem, ensuring counterparties you trade with benefit from fast and reliable settlements.
Get in touch with a member of our team today to learn more about our high-touch service and our best-in-class platforms. After filling out our contact form, one of our representatives will contact you to discuss your needs. Our team will help you decide on a package of services and offering you support to make use of every service and solution in our suite. For more information or to keep up with the latest industry news. Be sure to head over to the BCB Insights page.