DeFi: Experts’ Perspective

Decentralized finance is one of the most remarkable inventions of the cryptocurrency industry. We took on the difficult task of predicting the further development of this multifaceted phenomenon.

One of the best ways to see the future of various technologies or markets is to put the question of their prospects to the industry specialists – people already making money on this market. We got an opportunity to do it at the “Money of the Future” conference held in the city of Vinnytsia, Ukraine. One of the events there was a panel discussion on DeFi, which we also attended.

Of course, we can’t retell everything said over the hour by the panel members. Instead, we have put together the main points of the discussion. Hopefully, those could give readers an “insider’s look” at decentralized finance through the eyes of the market participants themselves.

– What is DeFi? It is essentially the relationship without intermediaries between users and cryptocurrency assets or between different assets themselves. The relationship is not regulated by either the state or by banks. Another definition of DeFi is any financial relationship between people on the blockchain built on smart contracts rather than centralized solutions.

– DeFi is a phenomenon that, similar to cryptocurrencies, is here to stay. The area will only grow further in the future. And the main question on the experts’ minds today is what other available market niches can be filled by decentralized finance technologies?

– The market is still developing. An entrepreneur can find their place in almost any segment of DeFi. If, for some reason, you are not confident enough that you can do this on the Ethereum blockchain, which has the most brutal competition and where the majority of the projects, you can try a smaller blockchain. Still in the market-conquering stage, their teams will meet you with open arms, prompt you, and help you with partnerships.

– There is an implicit notion that DeFi is quite limited in the number of users who can understand it. It’s just like in everyday life: How many people are involved in finance?! It’s boring! People are primarily interested and addicted to games or TV shows. It makes NFT and GameFi true heroes of the blockchain industry, as in terms of the user base, they show much higher growth potential than DeFi.

– At the same time, DeFi is able to attract capital which then flows into the fastest growing industries. So far, in decentralized finance, on a global, planetary scale, there are remarkably few people. According to statistics, about 15-16 million active DeFi users provide liquidity or regularly utilize the services. But this also means that the development potential is enormous.

– DeFi is advancing rapidly. It is the industry where anyone can find a place in line with their expertise. Like games? Try GameFi! Into art? Go to NFT! Have experience in insurance – there’s another growing sector! Insurance is a very underrated topic with very few existing good projects. There are also derivative platforms and all sorts of options platforms.

The situation there is even more complicated at the moment because the topic itself is much more complex. Bringing options or insurance to smart contracts is difficult, and the risks are higher.

– Those wishing to have a future in DeFi should look closer at new blockchains. Two years ago, Ethereum was the only blockchain, then Binance Smart Chain appeared. Cardano and Litecoin added smart contracts, the Solana blockchain sprung up, as well as a bunch of blockchains fit for building DeFi applications.

Here is what you need to understand: Let’s say Cardano makes smart contracts. There should then be the appropriate infrastructure: First – stablecoins, second – DEXs, third – landing platforms, fourth – derivative decentralized exchanges, fifth – GameFi and NFT. It’s already more than five directions. And the “blue ocean” will no longer be blue. It’s the same with cryptocurrency or any other industry – it will expand both upward and in breadth.

– We make a relatively small but still significant error if we say “people” while assessing the DeFi market size. These are not people, rather accounts and addresses. DeFi includes Ethereum as well as other networks, so a user may have several accounts (even five or ten). Therefore, it is more appropriate to measure the size of DeFi in accounts and addresses instead of people or users.

– Layer 2 solutions like Arbitrum or Optimism have not yet established themselves. So, first of all, the money is currently slowly coming in. Secondly, there are projects launched or planned for launch on these solutions. If you want to understand where to look for profit in DeFi, you need to follow the money. Where there is money, there is activity, the development of the ecosystem, etc.

– Crucially, you need to remember who survived the bear market. Because everything is good when the market is growing, everyone is cool, pretty, and interesting. But when the bear market comes, who will be left?! Ethereum proved itself; it calmly survived the bear market. You could even say that all the main Ether products appeared during that period. So when another crisis hits – which will happen sooner or later – the ideologues, those kept in DeFi less by money, and more by their belief in open finance itself, will remain.

– We see that the blockchain war has already begun. Everyone saw the success of Ethereum and wanted to repeat it. It led to the appearance of multimillion-dollar funds – Avalanche, Harmony – and exchanges creating their own blockchains. The question is: who will remain after a bear market comes, and by what means?

– A huge number of solutions have already been built on Ethereum. At the same time, other networks are now trying to “bite off” a piece of the market from them and often copy existing Ethereum infrastructure projects. In doing so, they can make excellent, beautiful sites. The issue here is what “red flags” can help you recognize a fundraising site with nothing to offer? In this question, you would do well to follow the “big wallets”. Because “big wallets” – people with a lot of money, teams, and companies – often have their own auditors. So before throwing money into something, they show the smart contract to their specialists for analysis.