The forecast on decentralized finance- The Cryptonomist

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Decen­tral­ized finance (DeFi) is an inno­va­tion that enables many ser­vices, and the fore­casts of many experts in the field see it at the cen­ter of every cryp­to project. 

Despite the fact that it can still be con­sid­ered as an entire­ly emerg­ing con­cept, DeFi is already quite estab­lished today. Many experts are cer­tain of this, the future of cryp­to sees decen­tral­ized finance at the cen­ter of many projects, the world is prepar­ing for an open finan­cial system. 

What is Decentralized Finance (DeFi) and why are the predictions so promising?

Decen­tral­ized finance fol­lows the same prin­ci­ple as dis­trib­uted ledger tech­nol­o­gy (DLT) of cryp­tocur­ren­cies

It goes about elim­i­nat­ing the need for cen­tral­ized finan­cial inter­me­di­aries (banks, bro­ker­age firms) and estab­lish­ing sta­ble Peer-to-Peer (P2P) net­works for secure transactions.

These trans­ac­tions are one of the key fac­tors of DeFi, its inde­pen­dence from any cen­tral­ized inter­me­di­ary makes it an attrac­tive alter­na­tive to the cur­rent finan­cial sys­tem. We are talk­ing about a high­ly mod­ern tech­nol­o­gy, capa­ble of autho­riz­ing peo­ple with an inter­net con­nec­tion, to par­tic­i­pate direct­ly in transactions. 

DeFi is part of the blockchain, which makes it secure and imper­vi­ous to any kind of counterfeiting. 

Decen­tral­ized finance offers auton­o­my and func­tion­al­i­ty to its users with a set of tools that reduce the oper­a­tional risks of banks and bro­ker­age firms. Its decen­tral­ized pub­lic blockchain gov­erns every trans­ac­tion with­in the indus­try, thus remov­ing the cum­ber­some bar­ri­ers of dig­i­tal sur­veil­lance of transactions. 

In the near future, the idea of decen­tral­ized finance being the basis for glob­al trans­ac­tions is thought by many. 

DeFi removes the finan­cial bureau­cra­cy of banks, the absence of strict reg­u­la­tions ensures that any­one with pro­gram­ming skills can inter­act with the blockchain and inno­vate finan­cial ser­vices. The legal con­straints of banks do not allow this, and they also hin­der many trans­ac­tions across inter­na­tion­al borders. 

A report dat­ed 2021 by Gart­ner, explains that at least 20% of large finan­cial orga­ni­za­tions will switch to DeFi by 2024. How­ev­er, it is not only Gart­ner ana­lysts who fore­see a pros­per­ous future for decen­tral­ized finance (DeFi). 

The future of DeFi according to venture capital firm Pantera

The ven­ture cap­i­tal firm focused on the cryp­tocur­ren­cy mar­ket holds as much as $3.8 bil­lion in assets under man­age­ment. Clear­ly, it has not proved immune to the frigid cryp­to win­ter of 2022. The fall of the Terra/Luna ecosys­tem and the col­lapse of FTX’s plat­form, some­how affect­ed Pan­tera as well. 

Thus, the ven­ture cap­i­tal firm found itself pon­der­ing what to work on to improve its sit­u­a­tion, com­ing to the real­iza­tion that work needs to be done on trans­ac­tion fees, liq­uid­i­ty, and usabil­i­ty. In sum­ma­ry, with its fore­cast for 2023, for the Pan­tera firm the future is Decen­tral­ized Finance (DeFi).

CEO Dan More­head explained that it is blockchain and DeFi that will solve the prob­lems men­tioned above. 

Joey Krug, co-Chief Invest­ment Offi­cer of Pan­tera, wrote:

“Look­ing into the future, I think it seems pret­ty clear that the his­tor­i­cal arc of the world’s finan­cial bina­ries will even­tu­al­ly become blockchain-based sys­tems using smart con­tracts. The real ques­tions are how we get there and what needs to hap­pen to get there.”

Joey Krug is indeed very proac­tive about DeFI, explain­ing that he sees a future where there will be easy access to decen­tral­ized finance. Where any­one can log in through an app, and have access to low­er fees, glob­al liq­uid­i­ty, and 24/7 oper­a­tional markets.

MakerDAO implements $100 million on DeFi Protocol Yearn Finance

Decen­tral­ized finance giant Mak­er­DAO on Mon­day approved a pro­pos­al to dis­trib­ute $100 mil­lion in USDC, on the DeFi Yearn Finance pro­to­col, where the deposit­ed sta­ble­coin will earn a return. Mak­er­DAO will earn an inter­est of 2% per year. 

The Mak­er­DAO finan­cial sys­tem is run by an autonomous decen­tral­ized orga­ni­za­tion, where any­one who holds the Mak­er token (MKR) can vote on pro­pos­als. The pro­pos­al in ques­tion was vot­ed on by about 72% of vot­ers. To ful­ly approve the pro­pos­al, and thus imple­ment the trans­fer of funds from the PSM, an addi­tion­al “exec­u­tive vote” is required. 

Mak­er­DAO is imple­ment­ing a strat­e­gy to earn through its $7 bil­lion reserve fund. By gen­er­at­ing a steady rev­enue stream, it could make DeFi an increas­ing­ly attrac­tive prod­uct. This is not MakerDAO’s first strate­gic move; in fact, the DeFi giant has var­i­ous sources of returns such as its part­ner­ship with Coin­base and var­i­ous invest­ments in US gov­ern­ment bonds.




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