Actively participate in the first DeFi Challenge of Square! Today's topic is "Emerging DeFi Trends". What impact will the development of DeFi have on our investment? Here are some of my understandings:
With the rapid rise of decentralized finance (DeFi), the financial sector is undergoing an unprecedented transformation. DeFi not only brings new opportunities to the traditional financial market, but also provides more financial services and products to users around the world. Here are the top 30 trends in the DeFi field that I have compiled:
1. Traditional financial products enter the DeFi field
The total value of financial derivatives in the traditional financial market is 10 times the global GDP, which means there is huge market potential waiting for DeFi to tap. As more traditional financial institutions begin to pay attention to DeFi, we can expect more financial products and services to enter this field in the future. For example, large banks such as JP Morgan and Goldman Sachs have begun to study DeFi and consider how to integrate it into their business.
2. DeFi helps blockchain games realize monetization
There are more than 3 billion gamers worldwide, who spend more than $159 billion a year. With the development of blockchain technology, the gaming industry has also begun to explore how to use DeFi to create value for players and developers. For example, games such as Axie Infinity and Decentraland have successfully integrated DeFi into their ecosystems, providing players with a new source of income.
3. Cross-chain technology solves scalability issues
Ethereum is the main platform for DeFi, but as the number of users increases, its scalability issues are becoming more and more obvious. To solve this problem, many projects have begun to study cross-chain technology. For example, Polkadot and Cosmos both provide cross-chain solutions that allow different blockchains to communicate and interact with each other.
4. DEX and AMM drive DeFi growth
Decentralized exchanges (DEX) such as Uniswap and Sushiswap use the automated market maker (AMM) model to provide liquidity, which does not require a traditional order book, but determines the price of an asset through an algorithm. The advantage of this model is that it can provide higher liquidity and lower transaction fees.
5. The increasing importance of governance tokens
Governance tokens such as COMP and MKR provide their holders with voting rights on the underlying DeFi protocol. The advantage of this model is that it ensures the decentralization and democratization of DeFi projects, as every token holder can have a say in the future direction of the project.
6. The rise of the DeFi insurance market
As the DeFi market grows, the demand for insurance is also increasing. Projects such as Nexus Mutual and Cover Protocol offer DeFi insurance to protect users from smart contract vulnerabilities and other risks.
7. The rise of financial NFTs
NFTs are not just artworks or collectibles, they can also represent financial assets. For example, RealT allows users to buy NFTs that represent real estate, while yInsure provides users with an NFT that represents insurance.
8. The growth of flash loans
Flash loans are a financial product that allows users to obtain loans without collateral. Platforms such as Aave and dYdX offer this service, allowing users to manage their funds more flexibly.
9. Globalization of DeFi
One of the main advantages of DeFi is that it can provide financial services to users around the world, regardless of geographic location or nationality. According to Dune Analytics, there are more than 3 million DeFi users, most of whom are from non-Western countries.
10. Regulation and Compliance of DeFi
As the DeFi market grows, regulators are beginning to pay attention to this field. The U.S. Securities and Exchange Commission (SEC) and regulators in other countries have issued guidance on DeFi, requiring projects to follow corresponding regulations.
11. Privacy solutions for DeFi
As users pay more attention to privacy, DeFi projects have begun to study how to provide better privacy protection. For example, projects such as Tornado Cash and Aztec provide private transactions and private smart contracts.
12. DeFi community building
The success of a DeFi project depends largely on the support of its community. Many projects such as Yearn.finance and Sushiswap have strong community support, which provides advice, feedback, and funding for the project.
13. DeFi education and training
As the complexity of DeFi increases, the need for education and training also increases. Many projects and organizations such as DeFi Pulse and Bankless provide educational resources on DeFi to help users better understand this field.
14. Risk Management in DeFi
The high volatility of the DeFi market means that users need to better manage their risks. Projects such as Set Protocol and dHEDGE provide automated asset management and risk management tools.
15. DeFi asset tokenization
Asset tokenization is the process of converting physical assets such as real estate or art into digital assets. Projects such as RealT and Myco allow users to buy and trade tokens that represent physical assets.
16. Liquidity mining in DeFi
Liquidity mining is a mechanism that incentivizes users to provide liquidity to DeFi projects. Many projects such as Compound and Balancer have provided liquidity mining rewards, attracting a lot of funds.
17. Stablecoins for DeFi
Stablecoins are digital currencies pegged to traditional currencies, and their value is relatively stable. MakerDAO's DAI and Centre's USDC are both major stablecoins in the DeFi field.
18. Credit scoring system for DeFi
As the DeFi market matures, the demand for credit scoring systems is also increasing. Projects such as Teller and Aave are studying how to provide credit scores for DeFi users.
19. Synthetic assets in DeFi
Synthetic assets are digital assets that represent other assets. Projects such as Synthetix and UMA allow users to create and trade synthetic assets.
20. DeFi’s layered solution
In order to solve the scalability problem, many projects have begun to study layered solutions. For example, zkRollups and Optimistic Rollups are both layered solutions for Ethereum, which can increase transaction speed and reduce fees.
21. Social Finance in DeFi
With the integration of social media and finance, social finance has become a new trend. For example, Mirror is a platform that allows users to publish and trade tokens that represent their opinions. The advantage of this model is that it can provide content creators with a new source of income and incentivize them to create high-quality content.
22. Decentralized Identity for DeFi
In order to ensure the privacy and security of users, many DeFi projects have begun to study decentralized identity authentication. For example, BrightID and IDENA both provide decentralized identity authentication solutions that allow users to use DeFi services without revealing personal information.
23. DeFi’s decentralized prediction market
Prediction markets are markets that allow users to bet on the outcome of future events. Projects such as Augur and Gnosis offer decentralized prediction markets that allow users to place bets more fairly and transparently.
24. Decentralized deposits and borrowing in DeFi
Deposits and borrowing are the core functions of DeFi. Projects such as Compound and Aave provide decentralized deposit and borrowing services, allowing users to manage their funds more flexibly.
25. DeFi’s decentralized payments
With the popularity of digital currency, decentralized payment has become a new trend. For example, Lightning Network and Raiden Network both provide decentralized payment solutions, allowing users to make payments faster and at a lower cost.
26. DeFi’s decentralized trading aggregator
As the DeFi market grows, the demand for trading aggregators is also increasing. Projects such as 1inch and Paraswap provide trading aggregators to help users find the best trading prices.
27. DeFi’s decentralized derivatives
Derivatives are complex financial products whose value depends on the price of other assets. Projects such as Opium and dYdX offer decentralized derivatives that allow users to manage their risk more flexibly.
28. Decentralized Fund Management for DeFi
As the DeFi market matures, the demand for fund management is also increasing. Projects such as Set Protocol and Melon provide decentralized fund management, allowing users to manage their assets more flexibly.
29. Decentralized Stablecoins for DeFi
Stablecoins are digital currencies that are pegged to traditional currencies and their value is relatively stable. Projects such as Terra and Frax offer decentralized stablecoins that allow users to manage their funds more stably.
30. DeFi’s decentralized financial tools
As the DeFi market grows, the demand for financial tools is also increasing. For example, Balancer and Curve Finance both provide decentralized financial tools to help users manage their funds more flexibly.
in conclusion
DeFi is rapidly changing the face of the financial sector. From the entry of traditional financial products to the development of cross-chain technology to the rise of DEX and AMM, each new trend is driving the financial sector forward. As these trends continue to develop, we can look forward to a more open, transparent and decentralized financial future.
