Decentralized Finance (DeFi) On A Rise As The Sector Sees New Developments
The concept of decentralized finance (DeFI) is gaining more and more popularity especially at a time when the global economic outlook has turned bleak during these times of the COVID-19 pandemic and traditional financial institutions have once again failed to uphold the interests of people.
The concept of blockchain-based decentralized finance (DeFi) is now on the rise as it allows individuals and companies to create financial applications without involving any third-party intermediary.
Decentralized Finance (DeFI) applications can be built on any blockchain network using the protocol specific to the network. However, this concept was first popular on the Ethereum blockchain network that facilitated the development of Decentralized Applications (DApps).
The purpose behind the DeFi initiative is to make traditional financial services to everyone in a permission less financial ecosystem built using the blockchain infrastructure. As per the definition, DeFi is an “An ecosystem comprised of applications built on top of public distributed ledgers, for the facilitation of permission less financial services.”
DeFi offers the promise of creating a full-fledged financial market and decentralize other financial use cases like trading, investment, lending, wealth management, cross-border payments as well insurance, using the blockchain technology.
As said earlier, DeFi basically relies on the concept of decentralized application (DApps) and make use of DApp protocols and smart contract features that work as connectors to create a peer-to-peer financial network.
DeFi can be implemented using different blockchain protocols, however, Ethereum continues to dominate the market in terms of DeFi activity only because of the fact that it is the most popular platform for developers to create their own DApps.
Other platforms like EOS and NEO are putting ahead some good options for developers. But the fact that cross-chain compatibility still continues to remain a major issue, early adopters of the Ethereum blockchain still continue to persist with the same.
DeFi projects continue to have a substantial share today in the Ethereum ecosystem. The ETH locked in several smart contracts is often used as a parameter to determine the growth in DeFi sector.
As of now, over $700 million worth of ETH have been locked in Ethereum smart contracts. MakerDAO dominates a majority of the DeFi applications on the platform.
Just two weeks back, Balancer Labs announced the launch of Balancer governance protocol token BAL on the Ethereum mainnet. Similarly, Compound also launched its COMP governance token a week before that appreciating a massive 500% in very short time.