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The number of active DeFi users, on the Ethereum network, is experiencing phenomenal growth. A recent report shows that this doubled, to 60,000, in only five months.
And expectations, that it will form the foundation for the new financial economy, have never been higher, signaling tremendous confidence in Ethereum.
DeFi Intends To Mirror And Recreate, Not Displace
In 2019, DeFi emerged as Ethereum’s next significant use case. Put simply; it refers to digital assets, smart contracts, protocols, and DApps built on the Ethereum network.
While this is nothing new, the modular aspect to integrate these are. And this allows for the recreation of traditional financial instruments. But all within a decentralized environment, free from corporate and government influence.
Moreover, this functionality has spawned several applications, including lending protocols, security tokens, derivatives, decentralized exchanges, and much more.
But the real beauty is that DeFi doesn’t intend to usurp the old, as is often the dream of crypto purists, and one which brings with it a mountain of difficulties, no. DeFi aims to mirror and integrate with existing traditional financial systems.
Mason Nystrom, of blockchain studio, ConcenSys put it like this:
“[it] is not about creating a new system from scratch, it’s about democratizing the existing system and making it more equitable using open protocols and transparent data.”
Indeed, the scope for development is truly mind-boggling. And as crypto assets evolve with the inclusion of newer categories such as staking and insurance, 2020 looks set to be pivotal for Ethereum’s success.
The Wheels Are Falling Off Traditional Finance
On that note, the trend towards DeFi could further accelerate by the decay of the old. Less than a month ago, the Federal Reserve had pumped a massive $235 billion into the repo market. That’s equivalent to the entire cryptocurrency market cap.
And the issue of inter-bank illiquidity shows no sign of going away as Monday saw another $60.7 billion added into the repo markets.
While the Fed had planned to phase down repo interventions, some experts believe they will continue well into into early summer.
As such, the warning signs are evident for all to see. And this can only be good for Ethereum and DeFi, as consumers turn to alternative instruments for their financial needs.
Expectations For Ethereum
Although 2019 was a so-so year for Ethereum, DeFi was its one saving grace. And given the surge in active users, as well as growing interest from traditional companies, DeFi is poised to turn the financial world on its head.
Indeed, the amount of Ether locked in DeFi, a metric of usage, reached an all-time high recently. According to defipulse.com, this equated to $783 million. That’s up 45% since October 2019.
And according to CoinGecko, 2020 looks to be a continuation of this form. Their recent report predicts that the space will continue to grow, and Ether locked in DeFi will exceed $1 billion.
That being so, the evidence is mounting that Ethereum is set to enjoy a resurgence this coming year.
Images from Shutterstock
