The DeFi protocols, one of the most successful systems related to Blockchain technology, have experienced strong growth in recent weeks. They could reach the $ 5 billion dollars even this year 2020.
Currently the Total Blocked Value (TVL for its initials in English) of ETH and BTC in the DeFi, is $ 3 billion. But, it is important to note that, a couple of weeks ago, it was $ 2 billion, according to DeFi Pulse data.
The projections that, next year 2021, the DeFi start over the $ 5 billion, are made by Polymarket. It is a firm specialized in price analysis. Also, a week ago, it bet that the TVL of the DeFi would reach $ 4.12 billion. Now his bet increased.
What are DeFi protocols?
According to these estimates, by the end of the year, the DeFi protocols will reach $ 5.16 billion dollars. To get an idea of how this works, it is important to know what DeFi, or Decentralized Finance, is and how it differs from traditional forms.
During the last centuries, the financial system was dominated by private banking and by the centralized entities of governments. With the arrival of the new finance revolution, led by Bitcoin and the Blockchain network, to which projects such as Ethereum were added, alternatives began to be born.
One of them is DeFi, which are protocols that fulfill the role of banking. In them, you can lend or receive loans, along with other banking services. The difference is that, as the name implies, they are decentralized and are available to anyone with an Internet connection.
It is one of the fastest growing areas in Blockchain. They can be created on the Ethereum network. Currently there are important firms that handle large volumes of money with these protocols.
These are the top 5 DeFi firms
- Maker with $ 654.2 million dollars.
- Compound with $ 553.1 million dollars.
- Synthetix with $ 513.4 million dollars.
- Aave with $ 488.0 million dollars.
- Curve Finance with $ 306.0 million dollars.
100% annual interest
Much of the success of DeFi protocols is that they allow 100% interest on investments. Therefore, this system allows them to be highly attractive to investors.
It should be noted that DeFi have a great similarity with banking, even in the payment system. In other words, firms like the 5 mentioned above offer rewards to users who give them liquidity in cryptocurrencies.
DeFi earn money for money loans (or cryptocurrencies in this case), while borrowers earn interest by giving them liquidity. Meanwhile, another difference can be highlighted with banks. It is that they issue their own tokens.
There are also risks
In the same way that there is an exponential growth of TVL in DeFi protocols, there are also dramatic falls. Thus, according to the same firm DeFi Pulse, between January 1 and February 14 of this year 2020, a significant rise was witnessed, followed by a sharp drop in a short period of time.
For that date, the TVL of the DeFi rose from $ 692 million to $ 1.26 billion. In a few weeks, this value plummeted to return to $ 600 million.
Data to consider
- Although the majority of DeFi’s blocked funds are found in ETH, there is also a large amount of Bitcoin.
- Anyone with Internet access can access DeFi protocols.
- DeFi fulfill all the functions of commercial banking, but with open protocols and in a decentralized manner.
- The TVL of the DeFi, a couple of weeks ago was $ 2 billion. 5 months ago, it was a billion. It currently reaches $ 3 billion. This indicates exponential growth.
The information in this content has been extracted from reliable sources detailed below:
1- Professional handling of content by the authors of CriptoTendencia.
2- External sources: DefiPulse.com and Poly.market.