The year 2020 was eventful, even for the crypto world. The market experienced several variations but things are still in motion. It was recorded that many of the cryptocurrencies experienced a price increase—talking about the likes of Ethereum and Bitcoin. But this is not all, Decentralized Finance (DEFI) was not left out, it was able to gain footing and expand its oars in 2020. The industry and capital growth of valuables like DEFI and Blockchain have toured an upward trajectory through its course in 2020. So the big question arises, Will the trends stay the same way in 2021? What predictions can be made? This article will expose you to predictions, expectations, and drawdown for DeFi in 2021—just soak yourself in.
Let’s get started.
Actually, it is safe to say that 2020 was the year for DeFi.
The growth of DeFi in 2020 was such that many call 2020 to be the year of DeFi. The Total value locked (TVL) in DeFi protocols stood at $1billion in February of 2020 and grew to $19billion over time! isn’t that huge? Although it was a drastic increase, it has since that time maintained its growth. However, the question still arises—Will 2021 still permit a drastic growth pattern for DEFI?
Let’s find out through intelligent predictions.
Prediction #1: Demand for DeFi will continue to rise.
DeFi is a movement that successfully deploys blockchain technology and distributed computing as leverage in achieving financial freedom especially from the routine traditional and centralized institutions. Sequel to this technology in motion, opportunities are created for enterprises, service providers, and customers to harness. Due to decentralizing lending protocols, DeFi became more popular in the year 2020. E.g Returns on investments ROI were quite promising for investors, and as a result, returns on product offers were found to be greater than what could be offered by traditional and centralized finance. Statistics according to DeFi Plus and State of Crypto Report 2020, revealed that steady growth was experienced by the total value of assets locked in decentralized finance in 2020. According to these sources, the growth of the business is reliant on its practicing protocols which give room for business development. This does not automatically give answers to this prediction; it only leaves the demand for DeFi pegged at the mercy of market factors that can directly or indirectly affect its demand. These factors include speed and scalability, security, privacy, and interoperability. Perhaps things can downturn if these market factors become significantly affected negatively.
Prediction #2: Scalability woes will be ended by Cross Chain technology.
Just as earlier mentioned, market factors interact with the demand and supply of DEFi, one of which scalability is a part of. Ethereum cannot be separated from DeFi, is an integral part of DeFi. Despite the rapid growth of DeFi in 2020, it still brought with it some problems for some of its users. One major point to tackle was the increase in transaction fees, with an accompanying increase in average transaction time. The explosive growth of DeFi led to a problematic situation for DeFi users. It led to an increase in transaction fees. At the same time, the average transaction time started increasing considerably. Ethereum was suffering scalability lapses before the rapid growth of DeFi. The rapid growth did not change things, it further caused it to experience a decline. However, it is proposed that cross-chain technology will be able to bear solutions that will solve the scalability problems experienced by DeFi. This might be done through the even distribution for the scalability problems across the board (different blockchains like Polkadot, Matic and many others. However, too high growth of decentralized finance could lead to the transactional cost’s increase on all other chains. As a result, users may start paying attention to the off-chain solutions like fixed deposits on Binance or lending through promissory notes on Tokpie exchange.
Prediction #3: Privacy and Security will thrive as the core of development for DeFi
Security—in the sense of data privacy and fund protection from internal and external hackers—will become dominant spots around DeFi and blockchain in the year 2021. there has been frequent hacking and thefts in DeFi, as it seems to be the central source for a lot of money. As a result of this, our prediction is on the states that companies will most likely demand an upgraded standard of quality concerning data privacy and security.
Prediction #4: DeFi Derivatives & Insurance Protocols Will Grow at a Faster Pace
In 2020, part of the center for intense activities in DeFi was its insurance sub-sector. some companies such as CDx and Nexus Mutale were able to carve a niche for themselves, and might even be able to do more exploits in 2021. Through avenues such as Facebook, Pay Holdings and others, Crypto and its intricacies have become sought after, and this gave DeFi protocols some degree of popularity. Most likely, improved DeFi insurance products will step into the armlet space and ease the stress of being affiliated with financial products in 2021.
What about the expectations from DeFi Ecosystem and Token Launchpads?
It has become easy for entrepreneurs who are tech-savvy to get affiliated with DeFi insurance protocols and work in collaboration to launch their products. As a result of this, DeFi insurance protocols (in form of a DeFi Ecosystem as well as Token Launchpads), have taken over. The likes of Emerge DeFi have been implicated in simplifying the process of launching DeFi insurance products successfully. Emerge DeFi has made it possible for DeFi insurance protocol to run KYC and background checks for onboarding users while also auditing the insurance protocols. Things are no more complicated than they used to. Also, some startups could avoid using token launchpad tools. Instead, they will be issuing and given away tokens for free to grow community fast. With the rise of bounty tracking applications like BountyMarketCap, users will be able to join promising startups and get their tokens. Simultaneously, startups will be able to increase their userbase quickly.
2021seems to be another year where DeFi will thrive as it did in previous years. There are high expectations and predictions have been made that DeFi enthusiasts will have a lot to harness. has lots of exciting stuff for DeFi and DeFi enthusiasts. This is not to say that there are no downturns. Market patterns might not stay favorable, and they might be a “form of manure” to make things boom! What do you think about DeFi and 2021? It will most likely be a great year, don’t you think?
This content is made possible by site supporter Tanvir Zafar.