Decentralized Finance, or DeFi for short, has been a hot topic in the financial world for a while now. It rose to fame in 2021 during the 'DEFI summer' where we saw a ton of different platforms all try to copy-cat each other and grab as much market share as possible. This also came with many scams and rug pulls, giving DEFI a bad name. Some people even think that DEFI is dead, but nope, DEFI is far from dead, it's only just beginning to make it's mark!
Sure, not every platform that popped up in 2021 made it to 2024. Like I said, most of them are now just footnotes in the history of crypto. But not all were scams or just platforms that died off into oblivion. Platforms like Uniswap, Pancakeswap, Sushiswap, Aave, and Compound Finance not only survived but thrived.
Maturing in Functionality
One of the most exciting aspects of DeFi's survival is how these platforms have matured over time. What started as experimental projects have evolved into robust ecosystems. Take Uniswap, for example. It began as a simple automated market maker (AMM) but has since grown into a powerhouse of decentralized exchange, facilitating billions of dollars in trades every day.
Platforms like Aave have not only given users the ability to provide liquidity and earn interest while loaning their crypto, they can borrow against it, and not only that, you can trade both your supplied assets AND your loaned assets. This has opened me up to all kind of options. I can be long BTC on the supply side, loan USDT or USDC and use it how i need to, then short BTC, ETH, or MATIC on the loan side to pay off the loan! I can then take that borrowed USDT or USDC, and use it on a leverage trading decentralized exchange like ApolloX, trade Bitcoin and Ethereum futures, and use the profits to send back and pay the loan. Pretty cool stuff if you ask me.
Liquidity: The Lifeblood of DeFi
Liquidity is the lifeblood of any financial system, and DeFi is no exception. The surviving platforms have not only maintained but significantly enhanced their liquidity over time. Pancakeswap, for instance, is now one of the most liquid decentralized exchanges in the Binance Smart Chain ecosystem, providing traders with ample opportunities to swap tokens with minimal slippage. Not only that, but developers and projects can build tokens on BSC, create liquidity pools on Pancakeswap, then use those contracts in different ways on their own platforms in different ways. This is the similar story with Uniswap and Sushiswap on Ethereum and it's layer 2 networks like Polygon and Arbitrum.
User-Friendly Interfaces
One of the barriers to entry for many newcomers in the DeFi space has been the complexity of the platforms. However, the surviving platforms have made significant strides in improving user experience. Whether you're providing liquidity, borrowing assets, or simply swapping tokens, interfaces have become more intuitive and user-friendly over the last couple of years and continue to make developments to make it better.
While the survival and maturation of existing platforms are impressive, the innovation in DeFi never stops. New protocols and projects continue to emerge, pushing the boundaries of what's possible in decentralized finance. Whether it's experimenting with new tokenomics, integrating cross-chain functionality, or exploring novel use cases, the DeFi space remains as dynamic as ever.
With improved functionality, growing liquidity, and a commitment to building better, easier to use interfaces, and furthering financial innovation, DeFi is here to stay. And as developers continue to drive the space forward, the future of decentralized finance looks brighter than ever in my eyes. So, if you haven't already, now might be the perfect time to dip your toes into the world of DeFi and find the freedom to trade, lend, borrow, and invest in a permissionless way!
This post was written in response to this post written by my friend, @jongolson and our comment conversation we had on inleo. Hope this helps! It is also posted on my main cryptocurrency research site, Coin Logic that now also has DEFI built in with our new decentralized exchange, Logicswap!
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Many of my cryptocurrency related articles as well as trading articles can also be found on my crypto research site, Coin Logic.
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Disclaimer:
The information in this trade journal is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.
