The world is ripe for inclusion into the cryptocurrency realm. However, there is an apparent disregard for any emerging technology. Many people don’t understand and simply ignore the large potential unleashed by stablecoins combined with decentralized financial applications (DeFi).
While the wheel might be the unquestionably great idea that everyone admired, many groundbreaking technologies coming afterwards have been met with a mix of bitterness. It appears to be human nature to reject innovation. The internet was a dubious development 25 years ago, computers were not taken seriously 50 years ago, and planes were considered an insane means of transportation some 100 years ago. Right now, we’re up to embrace another groundbreaking technology that will foster the most significant innovation in finance throughout the centuries – Decentralized Finance (DeFi).
Much like the internet did, DeFi will grow
For many, it feels like the world wide web has existed forever. The internet has become one of the most vital tools for communication and entertainment in today’s globalized world. While some regions still lack the infrastructure required to provide sufficient online coverage, others enjoy close to 100% internet penetration rates. For example, the United States ranks third with over 320 million active internet users nationwide.
This is an incredible achievement. Not that long ago, less than 50% of U.S. households had a broadband connection. In addition, further reach and more mobile connections mean people can access the internet wherever they are. In addition, over time, the technology itself has improved. The internet speed has increased drastically, making more innovations that were previously impossible valid and useful.
The early stages of DeFi
Right now, we are standing on a similar path with the blockchain and cryptocurrency sector. Specifically when it comes to DeFi. This field is underappreciated in the mainstream despite its promise. The number of cryptocurrency wallets has been growing by leaps and bounds over the last decade. It reached nearly 80 million users by November 2021.
Five years ago, there were less than 10 million users. In addition, new data suggests that global blockchain technology revenues will experience significant growth in the coming years. The market is expected to climb up to $40 billion by 2023. There is no doubt that we’ll experience another massive adoption cycle soon. However, simplification of entry into the DeFi space is the key.
The advance in digital finance is inevitable
The financial sector today is in dire need of innovation. However, there is an evident lack of adoption in the cryptocurrency sector. One answer is the rapid increase in the capitalization of stablecoins. This will undoubtedly skyrocket by more than ten times over the next five years.
First of all, this will happen due to banking service users who become disillusioned with banks. The second decisive factor will be offshore companies. We will see the flow of billions of dollars from offshore legal entities to stablecoins in the next few years. The third important factor is insufficient access to standard banking services in many countries. According to data recently released by the World Bank, as many as 1.7 billion people worldwide don’t have access to banking. This is a shocking statistic, especially in the age of modern technology where people can make online transactions, regardless of banking hours.
DeFi as an alternative
Decentralized Finance (DeFi) aims to become a viable alternative to the traditional financial system. It plays a game-changing role in operations such as lending, loans, and trade. Thus providing anyone on the planet with internet access to innovative financial instruments while eliminating the need for traditional intermediaries. DeFi’s rise clearly demonstrates a growing demand for this niche. It has transformed into a multi-billion dollar field. With the emergence of new protocols, opportunities appeared to profit without risks of the principal asset.
Every year DeFi platforms take more and more place under the sun, displacing the traditional financial institutions. Decentralized exchanges have already started outperforming centralized exchanges. By now, field market capitalization has reached more than $250 billion, and this trend will undoubtedly continue. While DeFi is gaining popularity, it is necessary to focus on an easy-to-use interface to achieve widespread adoption. Developers are constantly improving the user experience while eliminating fragmentation. As a result, user interfaces will acquire multiple features and make them available from one consolidated ecosystem.
Roadblocks to DeFi stability
The future of the crypto market, like the future of yield farming, is inextricably linked with stablecoins. The stablecoin exchange rate is by definition not volatile. This makes it suitable for accumulating and making payments by the average person. The day may come when most of the cryptocurrency market capitalization will rely on stablecoins. However, this future is not possible without addressing the current stumbling blocks in the system.
The problem is high network transaction fees. The gates to the yield-farming realm are closed nowadays for those with small deposits who can’t pay sky-high commissions. As a result, they are ultimately being cut off from this profitable global finance game. When a deposit or withdrawal costs around or more than 100 dollars, this does not allow the majority of the world’s population to use these products efficiently. This problem goes double for emerging markets such as India, the Asia-Pacific region, and Latin America. The issue has been solved, partially, by Layer 2 solutions and new blockchains.
The next roadblock is the complex interfaces that often scare off new users. When using a farming platform, one has to choose between 10 different pools. Then one must send LP tokens to another DeFi app and manually sell rewards once a week. This isn’t an easily understandable process when compared to traditional bank deposits. The future of yield-farming is in user-friendly and intuitive interfaces. Otherwise, it doesn’t exist.
Finally, there is a need for more security. Recently, there has rarely been a month without another record-breaking hack. Security is the essential criterion for the mass user to arrive in crypto. In general, the problem of hacks, together with the growth of developer expertise and regular updates of the language and frameworks, will slowly fade away. However, insurance companies are already getting started to provide services to users and ensure their deposits in yield-farming applications.
Defining the future with stablecoins
Adoption success lies in creating a more understandable environment for users. The current competition in the yield-farming market clearly shows that the Total Value Locked (TVL) is growing in products that provide greater profitability. Driven by the desire to make more money, users shift money from pool to pool, from application to application, chasing high APYs. This requires a 100% focus on the market and huge involvement in data resources.
All this has brought avid DeFi adopters to the decision to develop platforms for allocating users’ stablecoins. I strongly believe in the future, where such DeFi apps could replace TradFi and fiat money may become a relic of the oil and gas era. Cryptocurrency users have to start uncovering the full potential of stablecoins for efficiently harvesting the cryptocurrency field and staying safe from volatility and inconvenient rates. With the forthcoming advent of new platforms, stablecoin holders will be able to earn high interest on USDT, USDC, DAI, and other assets. A decentralized revenue aggregator which calculates the best yield automatically and allocates funds to the most profitable spot seems a natural solution to the aforementioned issues.
More users, broader horizons
Cryptocurrency is the only gateway into the world of finance and higher profits for many emerging countries. However, there’s a long bumpy road between the dream of achieving a better experience in DeFi. The onset of the new financial world looks very bright from where I stand. Soon, more users will broaden their horizons and enjoy the benefits of new financial technologies in the most profitable ways.