Is this worth talking about? Weighing DeFi products against token pricing madness

16. August 2020

It is no secret that 2020 has been the year of decentralized finance as far as the crypto world is concerned. In this regard, several DeFi tokens have recently enjoyed increases in value, leading many experts to believe that the future looks bright for this specialized sector. Global DeFi markets continue to climb to record highs in terms of total blocked value, reaching a peak of $4.75 billion on 11 August.

As a result of these developments, major players in the technology sector are trying to help financial institutions take advantage of the current DeFi hype. For example, Nitin Gaur, director of financial services and digital assets at Bitcoin Lifestyle, told Cointelegraph earlier that it is critical that traditional banks begin to recognize and accept the value propositions presented by DeFi technology, otherwise their existing business models may soon become obsolete.

DeFi’s growing popularity in traditional markets

According to Jack Tao, CEO of the Phemex cryptomoney exchange, a number of factors have contributed to the recent general attention that DeFi’s space has attracted. He told Cointelegraph that with each passing day, a growing number of DeFi tokens are being supported by prominent exchanges around the world. Not only that, this nascent technology has also been able to capture the imagination of the masses because of its ability to deliver new applications, implementations and decentralized projects in a real and tangible way.

Tao also noted that a large portion of investors around the world have also helped introduce DeFi into traditional markets due to their efforts to take advantage of continuous advertising, but mainly in an effort to maximize their profits in the shortest possible time.

Yam Finance is saved at the last minute

Similarly, Charles Read, an angel investor who previously participated in the development of projects such as DIA Data and the Orion Protocol, believes that three key factors have driven DeFi’s narrative in recent months: yield farming, liquidity mining and synthetic assets. In his view, the combination of one or more of the above elements can enable developers to build new systems that are not only novel, but also have the potential for widespread deployment:

„Now there are aggregator exchanges like ParaSwap and 1inch that allow access to the liquidity of all DEX markets through your wallet. What this means is that people in the crypto ecosystem are choosing to use DEXs more than ever before.

Read also noted that, due to increasing DEX volumes, the crypto market will continue to witness the struggle of several centralized exchanges to maintain their current trading volumes. As a result, an increasing number of traditional exchanges will continue to support other DeFi projects, causing older projects to move into the realm of decentralized finance. He added: „It is more a marketing game than a product game“.

Trading volumes on decentralized exchanges

A somewhat similar view is also shared by Sandeep Nailwal, chief operating officer and co-founder of a scalable Blockchain Matic platform, who believes that projects like Compound have set a successful precedent for the governance token model, which is now being replicated by all DeFi projects. He added:

„The use of Yield Farming, a way to encourage protocol token users to participate in the protocol is becoming increasingly popular. At the moment, most of these tokens depend on one central utility, the governance protocol. It remains to be seen whether the high ratings these tokens are currently dominating the market are really worth it.

 

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