Perhaps it was inevitable, but the crypto’s defining trend of 2020 appears to be subsiding. While not quite dead, the numbers indicate that the DeFi markets are starting to cool off. After reaching a peak of $12.5 billion total value locked towards the end of October, investment has tapered off towards $10 billion over recent weeks. Furthermore, according to Dune Analytics, DEX trading volume was down in October, for the first time in 2020.
Is DeFi dying? After all, even as all the indicators showed sentiment was increasingly bullish, some were predicting that it was a bubble bound to burst.
It seems highly unlikely that DeFi will vanish altogether. Based on current trends, what seems more likely is that 2020 has seen the first iteration of DeFi come to fruition. Now, projects and crypto companies are iterating on DeFi to create a new generation of decentralized products that merge with other crypto concepts to extract even more value.
DeFi Meets IEOs
Indian cryptocurrency exchange Bitbns is one such example of this merging of trends. The company recently launched a brand-new concept on their test net ” a decentralized token launchpad platform. It’s called Ascent, and it’s a kind of crossover between DeFi and the initial exchange offering (IEO,) a crowdfunding mechanism pioneered by Binance with its own Launchpad platform.
IEOs became popular among newcomer projects due to their ability to tap into a ready-made exchange user base, marketing platform, and the endorsement of an established brand in the crypto markets. However, they also come with several issues, including a lack of transparency over who receives the IEO tokens, a slow lead time to launch, and high costs for projects.
Uniswap and other decentralized exchanges offer a workaround for many of these issues, in that everything is performed transparently on-chain. It’s also fast and very low-cost to list a token.
Tech investor Antoine Bechara says, But on the flip side, there’s no vetting process. Investors have no idea what kind of project they’re getting into, and projects have to undertake all their own marketing to establish any investor confidence.
Transparent listings through governance
Ascent aims to overcome the pitfalls of both scenarios. The decentralized token launch platform uses a governance token, BNSD, that allows holders to vote on their favorite projects, providing a trusted reputation system that investors can use to assess the quality of any given project. The project incentivizes voting by allocating a proportion of fees to those who participate.
Bitbns believes that the platform has myriad use cases beyond pure cryptocurrency and DeFi projects. In a blog post announcing the launch, it outlines how anyone could use it to crowdfund for any purpose – such as a writer wanting to publish a book or even community projects like repairs or maintenance. The decentralized governance means that participants have full visibility over how funds are spent and can even use escrow to supply a slow drip of funding as needed.
A broader shift
Ascent isn’t the only project where we can see a shift towards merging DeFi into other areas of cryptocurrency. One of the most obvious is the increasingly blurred boundaries between CeFi and DeFi. Binance has been increasingly active in DeFi over this year. Over the summer it launched its own EVM-compatible Binance Smart Chain platform where numerous competitors to Ethereum-based DeFi have set up shop.
DeFi lending platform Aave also announced in July that it had been awarded an Electronic Money Institution license by the U.K. Financial Conduct Authority. According to reports, the objective will allow Aave to onboard users to DeFi from traditional finance. Inevitably, some kind of KYC check will be involved. However, it’s reflective of how we could see more crossover between DeFi and CeFi in the future.
Finally, another area where we could see this consolidation between DeFi and other segments of crypto is in non-fungible tokens (NFT’s.) Barely visible since the Crypto Kitties digital art craze of 2017, NFTs have recently been making a resurgence, with investment peaking around half a billion dollars in the last few months alone.
It seems most likely that DeFi will be with us for a long time to come. However, in 2021 and beyond, innovators will take the trends of 2020 and use them to develop new projects and features, creating even further value for the crypto ecosystem.
