The radical opportunities offered by decentralized financing are of great interest to both investors and speculators. The total cost of DeFi protocols has grown by more than 2500% in 2020, from around $ 700 million in January 2020 to over $ 20 billion in December 2020. TVL is a more useful calculation of the market value of DeFi because it accurately reflects fairness. Investors are willing to follow these protocols. And their commitments did not end in 2020. This year alone, TVL DeFi has more than doubled to $ 40 billion in February.
About the topic: Was 2020 “the year for DeFi” and what is expected of this sector in 2021? Experts answer
While Defi’s growth over the past year can largely be attributed to retail investment, 2021 will be the year organizations begin to participate in this activity. As the return on interest-based assets continues to fall to historically low levels and unique stimulus packages increase inflation expectations, a huge amount of money now requires higher returns.
Future-oriented asset managers turn to DeFi. Circle – a popular dollar-denominated cryptocurrency (USDC) issuer – is about to launch its first high-yield dollar-denominated digital account targeted at businesses. By providing loans to capital needs cryptocurrency markets instead of traditional saturated markets, the account can deliver up to 10.75% annual return. Although it will initially only serve companies, there are many options suitable for individual investors.
How to attract institutional investors to DeFi
During the meteoric rise of DeFi in 2020, dozens of individual attacks lost investor money, and half of all cryptocurrency attacks were related to DeFi protocols. Many of these achievements have benefited from new and innovative tactics such as the protocols themselves. Others were a repetition of the past that is still depressingly easy to prevent. Although the loss of money is regrettable, Defi’s security has improved dramatically in recent years.
Listing on any major stock exchange now requires that a project must be thoroughly investigated, as the risk of stock exchanges losing the security of customers’ funds is too high. But meaningful security does not end there.
RELATED: Code is the Key: Solutions to Prevent DeFi Security Violations
It is alarming that in 2020 there were attacks that led to the theft of money from protocols that passed strict security checks. While the audit focuses on a snapshot of the code before it is published, the process cannot account for the interaction between nodes once they have been published in nature. Defi’s dynamic pace of change means that new tools and software can create new risks.
RELATED: As confidence in auditing falls, DeFi Community is considering security options
Automated security tools can continuously monitor smart contracts for a wide range of known security issues, even after they are deployed on the public blockchain. Users can also secure individual transactions by requiring the contract they are negotiating with to meet a certain security threshold before the transaction and payment obligations can be verified.
It is important to be protected while the contract is in force, even if everything seems to be going well.
Apart from real-time security tools, there are several options for decentralized insurance options on the market today. There are solutions that can protect users’ funds locked in various DeFi protocols that give DeFi users the peace of mind of knowing that their capital is safe in the face of unforeseen events.
We envision a world of decentralized financing where protecting your assets is as easy as checking a box before the transaction, where technology throughout the chain protects transactions before they happen, and where security is a fundamental pillar of every platform.
Combined with outstanding profitability, this type of versatile security reputation will help lift DeFi from its current share of around 8% of the total value of the cryptocurrency market to a level that competes with the older economic system.