The past year has seen an incredible surge in the field of decentralized finances – also known as DeFi or open finance. In particular, it has become one of the hottest topics of discussion in the cryptocurrency and blockchain space. DeFi is revolutionizing the existing financial system by providing users access to network-level financial products, removing the need for central banks and other centralized institutions.
For those new to the space, decentralized finance (DeFi) is a way to access a variety of financial products and services in a fully decentralized manner. This includes peer-to-peer lending, trading platforms, protocol governance, and decentralized exchanges. By eliminating traditional banking intermediaries, DeFi allows users to access a wide range of financial services and open up new opportunities for risk management and asset management.
In the last year, DeFi applications have been widely adopted and implemented, with the total value locked in DeFi protocols rising by almost 1,000%. This has been driven in part by the introduction of yield farming and with those investments now worth more than $12 billion.
Despite this surge, there are still significant unknowns and risks surrounding DeFi, particularly when it comes to scalability and security. For example, recently one DeFi application was targeted by “rug pullers” – hackers who purposefully deploy a malicious contract to steal funds. This has caused some investors to be leery of entering the DeFi space, and it is up to the creators and users of these systems to create best practices that foster trust and support network security.
For those looking to get involved in the DeFi space, understanding the risks and having a well-rounded knowledge of the sector is key. With the amount of capital at stake, tracking the progress of existing DeFi applications and understanding how they interact with the rest of the financial system is of paramount importance.
This year has seen an incredible surge in the decentralized finance space, and with that, an unprecedented level of risk. Despite this, DeFi could be a game changer for the financial services industry and offer users access to products and services that were never before possible. For those looking to capitalize on this new technology, understanding the landscape and the risks involved is key. Follow us for more news and insights in the DeFi space as we continue to track the current trends, projects, and developments in the industry.