DeFi is growing: follow the developments that will shape the movement
1. Scalability solutions become priorities
The popularity of DeFi dapps is putting pressure on the Ethereum network, causing transaction fees or gas to rise. As of this writing, simple token transfers can cost several dollars, while complex defi smart contract development transactions, like opening a vault, can cost hundreds of dollars or more. Ethereum 2.0 will finally address the persistent problem of gas and other issues, and allow the network to scale to a level that can support widespread adoption.
Meanwhile, developers are creating interim and add-on solutions that allow for large-scale dapp launches before the full release of Ethereum 2.0.
One approach is to move certain tokens and operations to secondary chains on the Ethereum network. An example of this is Matic Network, Because Matic transactions happen on sidechains, they are fast and cheap.
2. Users Embrace AMM-Based DEXs
Automated Market Makers (AMMs) provide a completely new model for decentralized exchanges (DEXs), which use liquidity pools and prices set by an algorithm based on supply and demand instead of the conventional order books. Effectively, users trade with a liquidity pool based on smart contracts instead of directly with other users. It is an elegant and easy-to-use solution for trustless third-party crypto trading that avoids the hassle and complexity of moving traditional exchange systems to the blockchain.
AMMs exemplify how developers of DeFi platforms are adapting to the unique demands of the space and presenting users with opportunities unlike anything they have seen in the traditional financial sector. Uniswap, which popularized the AMM approach, is one of the favorite DEXs in the crypto space, along with Curve, Sushiswap, and Balancer.
3. Stablecoins: DeFi’s killer assets?
Described by Ethereum co-founder Vitalik Buterin as the most valuable and boring stuff to come out of DeFi offer users vital means to store and transfer value on the blockchain without exposing them to the volatility that cryptocurrencies are known for. Importantly, defi development company stablecoins are also powerful tools to enable the efficient allocation of capital to DeFi yield farming opportunities.
4. NFT: a very exciting crypto trend
Non-fungible tokens (NFTs) are indivisible blockchain tokens that represent a single digital or real-world item. They are rapidly gaining popularity as they demonstrate authenticity and ownership of digital art, collectibles, in-game items, and even plots of virtual land. NFT marketplaces such as SuperRare , Nifty Gateway , Rarible , and others allow people to buy and sell all kinds of collectibles using ETH and, increasingly, stablecoins.
5. Cross-chain collateral gains ground
As the demand for collateral to deploy on DeFi dapps increases, new ways to bring liquidity to the sector are also appearing online. An important development in this area is the growth of Bitcoin on Ethereum (via ERC20 tokens backed 1:1 by BTC). Two examples of this are Wrapped Bitcoin (WBTC), which uses BTC in custody of the token issuer (like USDC for Bitcoin), and Ren Protocol , which adopts a trustless model to tokenize Bitcoin and other cryptocurrencies for use on Ethereum.
What else is developing in DeFi?
Although the five previous developments are the most viewed, users are also beginning to focus on some others, such as:
CBDCs . For the past five years , central banks and governments have been exploring the benefits of blockchain technology with the goal of launching their own central bank digital currencies. Early versions of these CBDCs are now being tested, mostly in China . defi development services Several other countries are preparing to follow. Decentralized insurance applications have the potential to bring transparency and efficiency to this multi-billion dollar industry. Coverage of various pitfalls in the DeFi space, from smart contract exploits to exchange hacks, is a small but fast-growing use case .
The rise of true DAOs. If implemented correctly, decentralized finance protocols can be more secure, transparent, and efficient than traditional centralized finance systems. As the DeFi space evolves and awareness of genuine decentralized operations increases, more projects are moving towards becoming true DAOs (Decentralized Autonomous Organizations).