02 / 01 / 21

2020 was quite a successful year for Decentralized Finance


Pros and Cons of a Cashless Society

The boom of DeFi in 2020
2020 was quite a successful year for Decentralized Finance as the transaction volume of DApp industry grew by about 1200%. Experts claim that in 2021, DeFi would lay the future foundations of the crypto economy and Ethereum would most likely be leading the entire ecosystem by hosting more than 95% DApps. A great factor backing up this claim is that only 10 ETH-based DApps were accountable for up to 87% of the network’s total transaction volume until 2020, which is pretty significant.
Why is DeFi booming?
According to a report published by DappRadar, the primary reason for this growth is because a major chunk of money is being drained from Bitcoin into the Ethereum network due to higher-yield projects. As a result, ETH’s value surged by approximately 7X in 2020.
Apart from this massive growth, it cannot be ignored that the following niches have still not been able to get the required attention from DeFi enthusiasts:
NFT marketplaces
It is also worth noticing that while Ethereum denominated the DeFi marketplace in 2020 and is expected to continue its dominance this year as well, the competition is growing. The network is quite congested and it pushed Ethereum to its limit in 2020, thus increasing the gas price as well. Therefore, many competitors, including Tron, Wax and Binance Smart Chain have started filling up the space to capture their share of the market. While it might be bad for Ethereum in the long run, this healthy competition can boost the DeFi niche as a whole and provide more options to the endusers.
Decentralized Finance could also play a pivotal role in revolutionizing the banking industry and in the longer run, it even has the potential to replace traditional banking from the core. The current banking system is not only orthodox and outdated, but the costs associated with maintaining and running the banks are considerably higher. Moreover, even if we view it from the perspective of endusers, the experience is quite costly and inefficient.
DeFi has several advantages in the business sector as well since it is a gateway to new approaches for treasury management. For instance, businesses could opt for lending or liquidity mining to put their unspent capital for a high-yield RoI.
Apart from this, since DeFi is (essentially) decentralized, it is less prone to cybersecurity events (unlike traditional banks) because it does not fall under the ultimate authority of the network administrator – in fact, there is no network administrator!
Moreover, since there is no single point of failure, the users are far less likely to face server outages.
Among all these advancements, there is one concern though – the niche is quite segregated and every platform is venturing to play its role as a ‘competitor’ and in order to grow this industry in the long run, it is vital that this divide is broken and everyone focuses on making DeFi more useful for the endusers.

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