Decentralized financing protocols (DeFi) are becoming more and more important. According to the company's forecasts Messaria, specializing in market research cryptocurrency, this area may soon dominate one of the largest investment banks in the USA - JPMorgan. There is, however, some risk involved.
DeFi is the future of the financial sector
Whether DeFi assets will become a serious competition for modern financial institutions will depend primarily on three factors.
First, they must achieve global reach and compliance with legal regulations, and demonstrate greater efficiency than traditional institutions.
Second, the structure of the market is important. Although it is difficult to clearly define the directions of its development, there are many indications that the DeFi sector will occupy an important position in it. Third, decentralized protocols must have cost-effective, long-term value capture mechanisms.
According to analysts Messaria in the next 15-20 years, DeFi protocols will dominate modern financial institutions. Thanks to their inherent democratized economy, and the ability to cross all boundaries, their global scaling will take place much faster than you might imagine.
This is supported by the reports of the cryptographic company, for example Coin Metricsaccording to which under the wings Uniswap, SushiSwap and other decentralized exchanges, the market capitalization of DeFi hit another record. The blocked value of DeFi is already $ 30,24 billion and is still growing. The undisputed leader of DeFi is currently Uniswap, which in January reached USD 30 million in turnover.
The growing disappointment with traditional trading platforms also speaks in favor of DeFi. Moreover, interest has increased recently cryptocurrency exchanges, which was influenced by reports that Coinbase will be valued at USD 50 million.
The profit that can be achieved with DeFi tools is certainly tempting, but it is also not without some risk. In this case, it is precisely about the currency risk. Depending on the cryptographic resource, different degrees of risk-free rates will be assumed, and in some cases they may not occur at all.
Most DeFi platforms today are web-based Ethereumwhich means that the borrowing is done through tokens ERC-20. Another risk associated with them is the risk of using the protocol through errors or errors in smart contracts.
In 2020 alone, nearly USD 86 million was lost in trading with DeFi solutions. Many platforms in this group do not yet have appropriate security measures that will ensure adequate the level of security for financial resources.