One of the main aims and purposes of cryptocurrencies is to make money and payments universally accessible to anyone, anywhere. (PS: Don’t forget to clap if you like what you read! -) ) 1. That leaves the question: what exactly is DeFi and why are so many people talking about it? Total value locked in DeFi has grown from $1B in June to $12B in November. Meanwhile, DeFi popularity has skyrocketed with its market cap in November hovering around 11–12 billion USD, an impressive growth compared to the 1 billion USD back in June. It sits at the forefront of innovation in today’s blockchain space and won’t hold back to disrupt every financial service it encounters. Since then, the crypto realm has continued to evolve at an exponential rate, with newer cryptocurrencies and blockchain technologies consecutively emerging. But in the greater scheme of things, the advent of bitcoin in 2008 and the ensuing development of the crypto world in the past twelve years were the first steps to introduce a non-traditional way of thinking about and interacting with finance through new technology.
DeFi is everything at the same time right now. And let people like me help you by providing you with a framework to understand the fundamentals, question- and exclamation marks. What also didn’t help is that the vast majority of projects were scams or lacked the right mix of team, vision, implementation, to build out what they promised. It’s simple market dynamics, but nothing beats psychology. Many, many late comers to the 2017 ICO boom didn’t see a 10 X of their portfolio, but rather a minus 80% or worse. As prescribed by behavioral finance, the vast majority of people flock to a new trend when it’s actually time to get out. The last time was in 2017, when ICO investments (or speculations?) returned between 10 X and 1000 X before the whole market collapsed into a prolonged crypto bear market that’s been going on for the past two years now.
Industry veterans have seen it all before. A first glance shows it’s extremely disruptive: how else could it be possible to earn a 500% annual interest rate on a “yield farming” account? Yet the first question that comes to mind is “What? 500%? How is that even possible? Let alone sustainable?” Rightfully so? The potential of “decentralized finance” (DeFi) is enormous. The hottest buzzword on the tip of everyone’s tongues in the 2020 crypto realm.
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