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DeFi market review: what is it and how to make money on the new trend?

Summer 2020 has become really hot for the cryptocurrency community. All major coins are showing very good growth, and some, like Ethereum, even break price records in two years. For the first time in many months and years, the predictions for BTC at $15 – $20 thousand seem quite real. But, not only the dominance of bulls in the crypto markets is an important event in recent months.

Decentralized finance (DeFi) has become a real phenomenon this summer. These are financial services on the blockchain, in which participants interact with each other directly without intermediaries, using decentralized applications DAPPs. A very recent industry, thanks in part to the success of the Maker DAO and some stablecoins, literally blew up the market a few months ago. The capitalization of DeFi projects over the past three months has grown by 7 times and currently stands at $ 6.87 billion.

The growing of the value of blocked assets on DeFi accounts

It cannot be denied that the growth in the capitalization of the DeFi market is associated with the Ethereum rate, on the platform of which most decentralized financial applications operate. However, investors from all over the world are starting to take a closer look at this industry. The very active growth of many DeFi tokens presents them as a profitable investment. By the way, the present can be compared to the “ICO era” in 2016-2017, when the capitalization of many projects grew by leaps and bounds, and new investments flowed into crypto startups.

Of course, today this scale is no longer because investors remember well how loudly this crypto bubble burst. Nevertheless, decentralized finance is one of the most attractive areas for crypto investors at the moment, as DeFi is only gaining momentum and increasing in value, solving really pressing problems.

Today, the best analytical service for tracking the decentralized finance market is DEFI PULSE. Using the data from this site, you can find out about the capitalization of the entire DeFi market, the most successful projects, the number of blocked assets on the accounts of DeFi applications, and analyze the directions of the projects.

DeFi’s scope is very wide, and covers many areas – from lending and issuing stablecoins to launching decentralized exchanges and derivatives.

The main activities of DeFi are:

  • Credit and deposit platforms (MakerDAO, Compound), allowing you to take loans through smart contracts or make deposits that will be used by other participants;
  • Issue of security tokens and creation of stablecoins, by providing each new token with an equivalent amount of the underlying asset;
  • Decentralized exchanges (DFX) that operate without brokers in peer-2-peer networks
  • Instant crypto transaction protocols and cross-blockchain payments.

Tasks Solved by Decentralized Financial Applications

The most famous projects that have the largest capitalization among all decentralized finance are Maker DAO, Aave and Compound, the Synthetix token issuing platform and Curve Finance decentralized exchange.

TOP-5 decentralized financial services according to Defi Pulse

All these are well-known projects that together make 80% of the total capitalization of the DeFi market.

The industry is represented by dozens and hundreds of other projects that are actively attracting new investments. If you look at the charts of almost any project on Defi Pulse, the value of blocked assets in their accounts has increased significantly over the past 1-3 months. This suggests that decentralized finance is in high demand among investors. Experts also associate the multiple growths of fees on the Ethereum network with the DeFi activity.

However, it is worth remembering that decentralized finance is not a panacea for investors, nor is it a win-win investment. All investments in startups, and even more so in blockchain startups, are associated with great risks. Therefore, when choosing a project for investment, you should devote time not only to technical analysis but also to fundamental, in order to independently imagine the chances of success with one or another DeFi startup.

In the following articles, we will take time to analyze the most interesting DeFi from the point of view of both an investor and an ordinary user.