DeFi Is Going To Dwarf Bitcoin

in LeoFinance3 months ago

Last year, DeFi got a lot of attention throughout the crypto world. This allowed the Ethereum blockchain to explode. However, the pace has not really slowed down in 2021. So while NFTs get a lot of the media focus right now, DeFi is still chugging along.

As we can see from this chart from defipulse, the ascent is still very strong.

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The year started out with roughly $16 billion in Total Value Locked (TVL). This number has now jumped to near $44 billion as the first quarter is coming to a close.

Bitcoin has staged its own impressive run since the start of the year. Using a chart from Coingecko we see what the move was like.

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The price of Bitcoin basically doubled thus far in the first quarter. This too is tremendous growth.

For whatever reason, probably due to the disruptive nature of that asset along with the maximalism that exists, many feel the need to compare DeFi to Bitcoin. Sadly, the belief exists that Bitcoin will always remain the largest asset in crypto and be at the core of everything.

Nothing could be further from the truth. In reality, DeFi will trump Bitcoin by many orders of magnitude. Granted they are completely different animals so the comparison to begin with is not exact.

DeFi is going to result in numbers that go into hundreds of trillions of dollars. The $45 billion we see today is a drop in the bucket. Over time, we will see more assets classes moving in this realm, pushing it further ahead.

Thus far, in spite of the tremendous growth, DeFi is still fairly niche. Why is this.

Overly Complicated

Finance is difficult enough. This gets worse when people are confused by the process. This is something that DeFi is plagued with and will take some time to alleviate.

Switching tokens from one blockchain to another is rather difficult, especially if one is not using a centralized exchange. Even then, there is a chance that ones token might not be listed.

We also see difficulty with wallets. Most are not accustomed to dealing with keys. The UIs tend to be basic in nature, really catering to the more seasoned financial individuals.

Expensive

Ethereum is the leader in this arena, and by a wide margin. The DeFi services offered eclipse all other chains combined.

There is just one problem: the transaction fees.

As many are aware, Ethereum cannot handle a lot of traffic. It is better than Bitcoin yet still not up to par when it comes to moving millions of transactions a day through there.

This causes the network fees to increase as traffic fills it up. Hence, DeFi is really becoming a world of the wealthy since one needs to be playing with a large amount of money when entering this space. It simply makes no sense to pay $50 when trying to do a $250 or $500 transaction.

The idea is to be less, not more, expensive than the present system.

Lack Of Offerings

The DeFi world is still rather young. At the moment, we see a bit of a mania with yield farming dominating. This is a phase that will pass, bringing in more serious players.

However, for that to happen, there needs to be more offerings. Over the next couple years we will see this realm expand into such things as more collateralized loans and insurance.

It is also possible we see equity-type opportunities through synthetic assets. We are going to likely see a great many projects built around real estate.

All of these will be tokenized, allowing people to use their crypto to get into these assets.

For now, very little of that exists.

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Bank of America issued a report highlighting its views on DeFi and what is going to take place.

One of the issues they mentioned is the abovementioned scaling of Ethereum. The solution to this is going to be more chains getting involved. It is questionable whether Ethereum will be able to handle it all, even after the transition to PoS. However, there will be many more chains that are moving into this realm, copying what is taking place to start.

This will help to alleviate the burden we see on Ethereum. Binance Smart Chain already is making some progress although that is not truly decentralized. Nevertheless, crypto holders are finding opportunities there.

Ultimately, we will see an explosion in the DeFi area simply because the money is too great. When we are discussing total entering in the tens or hundreds of trillions of dollars, that is going to draw the attention of entrepreneurs and developers.

Bitcoin is a breakthrough asset and any move to the upside actually helps DeFi. Many people are finding that putting their BTC to work is a sharp move.

All of this feeds into the disruption of the present financial system. Each time money moves from established asset classes into crypto, it is helping to grow this space. DeFi is actually a layer on top of cryptocurrency. As the underlying value of those coins grows, the amount that can end up going to DeFi increases in a greater proportion.

Thus, when the price of Bitcoin goes up a great deal, that actually helps the DeFi world since a portion of that coin will find its way into that sector.

In the end, all of this growth helps many layers.

Therefore, do not expect that TVL to remain under $50 billion for too long. It is likely we see that number enter the triple digits fairly easily this year.

The room for growth is there especially with a lot o money starting to flow in.


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TBH, my only concern with cubdefi is BSC being centralized.
Defi sphere is still young and there is a still lot of room for further development.

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TBH, my only concern with cubdefi is BSC being centralized.

Without a doubt. There is room for a decentralized alternative to quickly step in and take up some of the market.

Hopefully we see one that is in development roll out very quickly.

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I definitely agree that the fees and the over-complicated nature of Defi will be a problem. However I see this as something that will change because people will naturally move towards the systems that can solve these issues. ETH is fairly crazy and I can't see myself doing anything on ETH because of the fees as well as the protocol debacle. BSC is better but I don't think it will be the final side chain to apply Defi. I think there will be even better systems created to attract users.

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I think there will be even better systems created to attract users.

That is the nature of innovation. I agree with this assertion that we will see something coming online that is ever better than what we see out there.

Hopefully it pops up quickly.

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Anything that challenges the hegemony of the big banks and other middlemen gets my support! !BEER

The banks are under attack from many angles. The growth of DeFi will only make them less relevant.

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Do you think that a possible error in the Ethereum system someday in the future could severely damage DeFi projects?

Like the DNS attacks on the Pancake and Cream system a few days ago.

No. Cybersecurity is a major threat to all online systems and are not going away. People are well aware of them and know there are a lot of bad actors out there.

Systems will have to do their best to protect things. The key is that sites got attacked, the chain did not.

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DeFi looks like the future of banking. From what I read lately it seems that an upgrade for Ethereum is coming something called Optimism if I'm not mistaking. That will help scaling and lower fees. I guess this will also push ETH to over $10,000 for this cycle. It's hard to even imagine sometimes to what extent the crypto disruption goes.

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I am not sure. I heard the scaling might be solved but not the fees structure so much. At this point, it is unclear what Ethereum will look like. Some pretty smart people working on it so I am sure they will pull it off.

However, the march forward is stalled because of the fees. That is an opportunity for others to step in.

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Thus, when the price of Bitcoin goes up a great deal, that actually helps the DeFi world since a portion of that coin will find its way into that sector.

I think it is because they are giving the same message: Escape from the maze. The existing financial system has basic problems that push people to explore new investment areas. At that point, crypto is leading the way to build another option for investors.

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One of the issues they mentioned is the abovementioned scaling of Ethereum. The solution to this is going to be more chains getting involved

This is the problem with ETH but also the best thing that happen to Defi as it has push more things like Leobridge and cross chain platforms to be developed. I for one think the future is not one chain but many working together as a whole ecosystem.

Decentralization within the industry. Not healthy to have everything on Ethereum. It is better if other chains start to pick up the slack too and pull more people (and money)in.

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I just found out about https://defipulse.com Thanks for the introduction!
BTC has just become this crypto token that is held by bankers and exchanges mostly. Nobody is using it for any real purpose like paying for stuff.

DeFi on the other hand is vibrant and many stuff happening in it. There's a lot that could happen in the space. Hive is just perfect place for DeFi IMHO. Free Tx is a huge deal.

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I think the development is going to focus a lot in the DeFi space. We are seeing a lot of things coming out that are very existing. The fact that it is gravitating away, at least to a degree, from one chain is a great step forward.

We will have a lot more innovation taking place in this arena. Too much money at stake.

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In my opinion. DeFi is not going to draft bitcoin. Bitcoin is just 12 years old and it is 1 Trillion dollar in market value. There is sooo much room for improvements so to speak.

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And how long do you think it will take DeFi to have more than a trillion dollars locked up?

A couple years?

The financial industry is enormous worth tens of trillions of dollars. Do you think all of that is going into Bitcoin?

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HIVE!D

Will dwarf ETH fo sho!

Screenshot 2021-02-24 at 7.19.36 AM.png

I cant imagine that. I think Bitcoin, Ethereum and Hive dont actually rival each other.
Bitcoin is a Valuestorage.
Ethereum is the a new form of the internet.
Hive is a new form of social media.

But i have no idea what im talking about. Im new to all this stuff.

I like your approach.

I don't believe there will be rivalry either. Just engaging with the content.
Kind regards.

I like that idea. We will see if it happens.

We need a smart contract platform that can rival it. Hopefully one comes about soon.

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I think so too. The original idea of Bitcoin of a peer to peer "cash" system is likely never going to be a reality. Instead, the main innovation is the concept of allowing anyone to be their own "bank" and based on their core store of value take or give loans and do other financial choices.

Imo it's a bit like the way our chain evolved a lot since the early idea of it merely supporting a website trying to be an alternative to Reddit.

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Evolution is always interesting in technology as great successes are often a long way from where they were originally envisioned. Bitcoin is far from what it was suppose to be yet it is very valuable for the role it is assuming.

Yes we are also seeing Hive's evolution to a major leap from the Reddit alternative which never was implemented since the community started to be concerned about quality content.

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50billion is a tip of the iceberg. The next ten years will be super interesting.

Yes it is the tip and we will see great growth, I believe, in the next 2 years.

This will happen very quickly if people start to see the value over the traditional financial sector.

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CubFinance must maximize utility and simplicity of use. The real killer app is making participation as effortlessly easy as possible.

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Good thoughts on the challenges - it seems that the people who figure out how to make this super easy will get lots of traction.

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Hi @taskmaster4450

I missed this article. I definitely agree that DeFi is huge now, and only getting bigger. There is what I call dual demand.
The small investor needs the access to sophisticated financial instruments and the large investor needs access to better transactional efficiency and better percentage yields. It’s a humorous synergy of those fleeing the legacy instruments because the instruments preyed on them, and those who benefitted from legacy instruments simply seeking higher yields.

Thanks
@shortsegments

P.S.
What does 4450 stand for?

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DeFi is still highly speculative. When it also starts to have really useful value, more capital will be channeled into this sector

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True. The insane yield farming days are numbered.

That said, there are legitimate purposes with DeFi with more coming I believe.

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It's hard to imagine anything dwarfing bitcoin at this point but we'll see what happens :)

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Well the transactions alone last month on BSC were over $170 billion so if this is early then that figure could easily be the figure in 6 months that is invested. This has just got going and can only get bigger as I am seeing names of coins now I have no clue but are highly valued. These I can imagine are similar to our Cubs.

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100% it's still new and use of access and use cases will drive defi. I can't wait to see CUB leading this space and smashing glass ceilings.

I'd anticipate as market growth occurs so to will defi and people will be looking for projects that are operating as stability and project development will continue to take top place.

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DeFi Is Going To Dwarf Bitcoin

C'mon, that's not fair to bitcoin! You're comparing an asset to an alternative industry. :)

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