Sep 2, 2020
DeFi: total value of blocked assets reaches $9 billion
DeFi: A financial system without banks
DeFi: upward acceleration
The total value of Decentralized Finance (DeFi) has reached a new milestone, reaching $9.02 billion, as DeFi projects have gained momentum in recent months, resulting in an incredible increase in the total value of frozen assets (TVL) of 85% in August.
DeFi: A financial system without banks
Decentralized finance or simply “DeFi” is a trendy concept in 2020, but today, many people still find it difficult to master it.
Decentralized Finance, in English in the text, has an interesting potential and encompasses financial products and services based on the blockchain such as the DeFi Saver which is an easy to use management portal for MakerDAO CDPs and compound portfolios, or DeFiner which is a decentralized lending market available worldwide to borrow and lend digital assets securely via smart contracts or MakerDao, the decentralized credit platform on Ethereum that supports Dai, a stablecoin whose value is indexed to the USD and supported in ETH or BAT.
Traditional finance is based on institutions such as banks that act as intermediaries after different actors of the economic system. Namely, banks have two main activities: retail banking which deals with individuals and the day-to-day management of companies and finance and investment banking which deals with exceptional corporate transactions. A bank is therefore, at the same time, a company that:
- Produces banking services: credits, reception of deposits from the public, payments;
- In fact trade or distribution, either directly or through relations with banking intermediaries;
- Trades in other ancillary or related services, such as investment services, insurance, or any other provision of services.
Whereas, to date according to the World Bank: nearly 1.7 billion people have no access to banking services. Thus, DeFi’s main advantage lies in facilitating access to financial services, especially for individuals who are far from the current financial system.
It is a notion that refers to a financial ecosystem comprising a set of open-source and non-censurable financial services or more precisely an ecosystem of financial applications that are built on blockchain networks.
The idea of decentralized finance (DeFi) is to create a financial system without banks or central counterparties, to make financial services for individuals accessible to the greatest number of people with only a smartphone and an Internet connection. It does not require the intervention of intermediaries and arbitrators. Thus, in this new context, you will no longer have to pay fees associated with the various banking services. Users maintain full control of their assets and interact with this ecosystem through peer-to-peer (P2P), smart contracts, digital currencies and tools such as decentralized applications (dapps) that allow anyone with a smartphone to easily access financial services at a lower cost.
Another potential advantage of DeFi is the modular framework on which it is built. Its system is natively digital; it runs on decentralized infrastructures, which notably enables it to be resistant to censorship. Through DeFi applications, public blockchains will potentially create new financial markets, products and services.
DeFi: upward acceleration
More and more people are interested in the DeFi ecosystem, on August 1st, there were 293,475 DeFi users. This number increased to 388,011 users on August 29th, representing a 32% increase in the number of users.
Between September 2017 and mid-August 2020, the total value of DeFi contracts also skyrocketed from US$2.1 million to US$6.9 billion. Statistics from the defipulse.com website show that the total value of blocked assets (TVL) in the DeFi economy as of Sunday, August 30, 2020, is $7.8 billion.
DeFi is booming and the total value of blocked assets has crossed 9 billion dollars on August 31, 2020.
Many DeFi tokens: have seen their value multiplied by three even four in just one year and others even considerably more.
The Aave Challenge Lending Platform accounts for 21.86% of this current value. Aave continues to be the largest DeFi project, with $1.71 billion locked in, followed by MakerDAO with $1.43 billion, Balancer with $1.36 billion, Curve Finance with $1.26 billion, yearn.finance with $953.6 million and Synthetix with $871 million.
Yearn’s YFI token jumped 75 percent in the last day, with the price reaching a high of $39,189 per unit. Yearn.finance (YFI) is one of the Decentralized Finance tokens. Specifically, it is the yearn governance token, a DeFi protocol developed by Andre Cronje that helps users move assets between different liquidity pools.
On Sunday, August 30, YFI is just above the $30,000 mark, with the price dropping to $27,000 per piece after midnight. The price pushed its market capitalization to $1 billion.
For its part, Aave has just climbed to first place in terms of dominance. When news.Bitcoin.com reported that the challenge economy broke through the $4 billion mark, Maker captured 31.9 percent of the domination on August 3. Not to mention DeFi’s infrastructure-related tokens, such as Chainlink’s LINK, which also rose sharply.
Decentralized finance focuses on building financial services separate from the traditional financial and political system. Projects in this ecosystem are gaining momentum and even traditional stock exchanges have begun to list many of the most popular DeFi tokens.
Will this lead to a more efficient financial system?
Written by Laetisia Harson, Project Manager at Magna Numeris
