Figuring out where the decentralized economy started often ends in rhetorical debate. Some have argued that the invention of Bitcoin (BTC) a decade ago marked its beginning when a major cryptocurrency was the first peer-to-peer digital money and is the core of the concepts that DeFi is based on. Others say – and that would be technically correct – that DeFi kicked off in December 2017 when the Ethereum-based MakerDAO protocol was launched, followed by Compound Finance and Uniswap, which were released in September and November 2018, respectively. It’s no exaggeration to say that Davy’s real takeoff began this year.
The huge increase in Defi’s total value, which began this summer and surpassed $ 16 billion this month, has undoubtedly made the sector one of the most talked about topics in 2020. And, as expected, it is precisely those who support him and those who criticize him.
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Despite being one of the hottest topics this year, some still argue that DeFi continues to be a largely niche economic instrument in the world of global finance. The rapid rise in money inflow into space has unexpectedly prompted DeFi to compare the original coin boom in 2017 and anticipate its potential downsides. Meanwhile, others have argued that many projects in space are not truly decentralized and do not reflect the true idea of DeFi.
Other concerns are closely related to transaction fees on the Ethereum network, which hit record highs several times this year, casting doubt on the long-term sustainability of the network. But it would be a mistake to blame only DeFi for the gas price hike, as it is also influenced by how organizations store and protect digital assets. One solution could be to open a $ 250 billion bitcoin treasure fund for DeFi products.
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While the DeFi concept is promising, there are also some pitfalls, obvious financial risks, and a number of technical risks. It only seems necessary to improve the underlying infrastructure of most decentralized applications.
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In the long term, a decentralized economy could change our world as 1.7 billion people still lack access to traditional financial services. Going back to the rhetorical debate about the origins of decentralized finance, DeFi completed the work that Bitcoin began, the second step in the development of decentralization that could solve the problem of financial inclusion.
As 2020 draws to a close, Cointelegraph is reaching out to blockchain and cryptocurrency experts for their views on the Year of DeFi.
How has DeFi impacted the crypto industry in 2020 and what can we expect from the DeFi space in 2021?
Brendan Bloomer, CEO of Block.one:
The decentralized economy was definitely one of the most dominant features of the year. The billions of dollars in money raised in the ecosystem confirms the widespread interest in DeFi; However, this increase has sparked growing suspicion from regulators who want to understand the limitations and possibilities of DeFi applications.
At Block.one, we believe DeFi needs to evolve to provide a sustainable link to the old economy and create a more open financial system. We call this Open Programmable Finance or ProFi. We think of ProFi as the bridge of the transparency and integrity of the EOS blockchain to the regulated financial world.
One of the main differences between DeFi and ProFi is that ProFi companies include acceptable risk-based access to rules and compliance-based transactions. Cryptocurrency interoperability and regulatory frameworks are rapidly emerging and evolving. The true winners in the digital economy will be those who think long-term and take the time to ensure that their products meet the demands of forensic and professional services. ”
Brian Brooks, Acting Comptroller of the United States Treasury, Office of Comptroller:
“Decentralization is one of two major forces transforming financial services. Beyond dividing it into three traditional core activities – lending, payments, and deposits – decentralization is changing how we consume financial services and how banks operate. I believe that we are still in the first quarter of a longer game. And there are many more of the biggest benefits and developments.