The Future of DeFi
DeFi has no borders, no third-parties and no central authority. What it does have are the tools to facilitate an alternative financial system that anybody can use around the world, anytime.
Born only in late 2017, the DeFi space has yet to fully bloom. At the time of writing, there are almost $100Bn locked in DeFi, which in the last years has evolved through network protocols, stablecoins, NFTs, dapps and more. And it will have even more potential as technology further develops!
So what does DeFi do that a traditional financial system cannot?
DeFi is a self-sustained and permissionless system in cryptocurrency financing. It works through developing smart contracts and dApps, and lets users manage their money through non-custodial services with no middlemen.
“You don’t have to trust individuals or companies with your money”Oasis Team
DeFi lets you earn, lend and borrow crypto using a wallet without any need for a centralized entity, like a bank. From investing, to transferring, or for storing your assets, DeFi’s decentralised computer systems have got you covered.
DeFi can also give you access to reasonable yields on stable assets like DAI. Using the Oasis.app you can borrow Dai and Multiply your exposure to several cryptocurrencies, making leverage-like trading on your favorite collateral tokens like ETH, wBTC and many more.
DeFi can provide liquidity - the ability for a coin to be easily converted into cash.
It works by creating liquidity pools in smart contracts where providers deposit their assets in return for yield.
“DeFi offers a future where your money is always in your control”
What has contributed to DeFi’s expansion?
- It's an efficient flow of capital digitally deployed with smart contracts. This is an attractive feature of DeFi as it allows direct and fast transactions.
- It offers opportunities that benefit both the user and the developer because of DeFi’s open source nature and transparency.
- It is a growing example of how finance can be a democratic system
- It is accessible for everyone, everywhere and anytime, just with an internet connection, allowing also the unbanked people to use financial services
- It opened a world for sophisticated financial products to be built in the digital world which has widened the horizon for what a financial system can be.
“It will continue to get bigger as more and more people understand the benefits”Oasis Team
What are the current barriers for further growth?
As stated above, the DeFi world is growing fast and gaining a lot of attention, but there is still a long way to go before it becomes “mainstream”. We also recognise that to do so there are some barriers which have to be broken.
- Firstly, we do understand that a big user issue for beginners is navigating the resources, and working with your own learning curve, to gain the knowledge that's needed in DeFi. There is no measurable skill you need to use DeFi products or invest but we like to think of it as a continual process, there is always more to be understood.
- Scalability is also a challenge that is being faced. The future of DeFi might benefit from multi-blockchain collaboration as this could offer adaptable solutions for transactions to take place more efficiently.
- Gas fees are one of the noted areas for improvement in DeFi, as by nature they change and spike with network traffic. This also affects network efficiency as an ongoing point to improve for many DeFi protocols.
What might be the next new popular craze linked to DeFi?
In 2021 we saw the rise of Crypto gaming and NFTs. Here, we can’t know what the next big thing will be for DeFi, but we can give some ideas:
It could be that the drive for real world finance/assets in DeFi will spawn in 2022. Until now all products in crypto and DeFi have been virtual, but could there be a space to merge real world assets with virtual platforms? We have seen a lot of movement in this direction lately, also within the Maker Protocol. You can read this thread about the introduction of RWA as collateral.
Another very useful case could be to use DeFi in insurance. This would be to ‘insure yourself’ or ‘buy coverage’ against losses or damage that could occur. Examples of this might be attacks on a DeFi protocol, smart contract failure or even a price crash. Maybe this can also be turned the other way though, and DeFi could be used as an insurance fund service itself.
Also Defi options vaults (DOVs) have grown a lot recently, grabbing interest of private Defi investors and of the largest institutional players as well. The “magic” is in the simplicity of these products: investors simply ‘stake’ their assets into vaults which deploy the assets into options strategies.
There are many more use cases around and it is actually very interesting to see how DeFi space is evolving in its different souls over time.
How can we predict success in DeFi?
Ultimately, we can’t. But we can follow the data trends and analyse success year by year and we see how many good projects and talents are entering the space day by day. Now we are also seeing the rise of rollups and Layer 2 solutions that can help a lot in scalability of DeFi.
In general, the potential of the industry is huge and we just have to wait for more people to understand it. And our job is also to help them, by making it easier to understand through contents and a good UI.
“It is a technological leap forward. It is a safer, faster, better version of what we have as traditional finance right now. Eventually, everyone and everything will be on the blockchain somehow”
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January 19, 2022