Although this is a relatively new space, DeFi has quickly grown to become more attractive. Additionally, projects like Solana and Polygon have grown to compete with Ethereum. Recently, Cardano also introduced DeFi smart contracts on its platform after an Alonzo hard fork event.
According to founder Charles Hoskinson, however, DeFi is in an economic cycle where the market is struggling to assess its value. In a recent interview, he claimed,
“I think DeFi is in a bubble and it’s still happening – NFT and DeFi are the last.”
The executive also compared it to the Initial Coin Offering (ICO) revolution of 2017. It should be noted, however, that Hoskinson was quick to point out that the DeFi bubble “doesn’t necessarily mean it’s is a bad situation “. Instead of,
“You have new projects that have very small development teams, not a lot of cash, and they’re worth a billion dollars. “
Realizing its potential, banks and financial institutions are also betting big on the DeFi space. According to recent estimates, DeFi could see an influx of $ 1 trillion in the coming years from institutional investors. This is if the top 100 banks put at least 1% of their assets under management (AUM) in DeFi.
But, should they? Well, the consensus is yes. For example, according to Philip Gradwell, chief economist at Chainalysis,
“DeFi is the next logical step for crypto investors.”
Chainalysis also found that large investors are driving the growth in DeFi adoption. It has been called “one of the most innovative and fastest growing sectors” of the crypto ecosystem, especially in developed countries like the United States.
What else does DeFi need to launch its next phase?
IOHK CEO Hoskinson pointed out two things that could accelerate DeFi adoption,
“First of all, you have to have a Dapp store… The other thing is we have to start thinking about cross-chain in DeFi.”
Here, by Dapp store, Hoskinson meant something like Google Play or iOS store. Interestingly, Hoskinson also believes the “next generation of DeFi is up for grabs,” the SEC crackdown concludes.
SEC Chairman Gary Gensler hinted at bringing DeFi under regulatory control last month. Bureaucracy, in the executive’s opinion, will lead to “better support for any future regulation” as “new DeFi protocols will be built to compete with them.”
But not everything will succeed in this “second wave of DeFi”. In addition to cost predictability,
“The winners of the future in the DeFi space will have liquidity and interoperability, the ability to move multi-channel.”