The value of crypto assets and the underlying distributed ledger technology (DLT) has skyrocketed over the past decade. This article discusses the top 7 Blockchain and Defi trends to look out for this year.
What is Blockchain?
A blockchain is a form of distributed ledger technology (DLT), which employs encryption for the purpose of securing and validating transactions carried out over a network of computers. It refers to the underlying technology that underpins cryptocurrencies like Bitcoin and Ethereum, among others.
What is Defi?
Decentralized finance, also known as DeFi, is a movement that employs blockchain technology in an effort to build new kinds of financial services that are not only open and transparent but also available to anybody who has access to the internet.
This encompasses activities such as money lending and borrowing, trade, and insurance, all of which are often administered by centralized institutions. Instead, DeFi makes use of smart contracts stored on the blockchain to effectuate these transactions in a decentralized manner. This might potentially enable a financial system that is more welcoming to a wider range of users.
Blockchain and Defi trend
In recent years, the trend of decentralized finance (DeFi) has seen a lot of growth and innovation, with an increasing number of projects being built on top of blockchain platforms, such as Ethereum.
These projects provide a wide range of financial services, such as lending, borrowing, insurance, and trading, along with new financial instruments, such as tokens, stablecoins, and yield farming.
DeFi is a term that stands for “decentralized finance,” which refers to the use of distributed ledger technology (DLT) Because of this, the value that is locked up in DeFi protocols has significantly increased, which has piqued the curiosity of investors, developers, and regulators alike.
Top 7 Blockchain and Defi trends to look out for
The top 7 Blockchain and Defi trends to watch out for are;
- Decentralized finance (DeFi)
- Non-fungible tokens (NFTs)
- Stablecoins
- Yield farming
- Security token offerings (STOs)
- DeFi derivatives markets
- Crypto ETFs
Decentralized finance (DeFi)
Decentralized Finance, or DeFi for short, is a movement in blockchain technology that refers to the process of developing financial apps and services that can run on decentralized platforms that are powered by blockchain.
These platforms enable the establishment of decentralized versions of standard financial instruments including loans, exchanges, and insurance by automating financial transactions through the utilization of smart contracts. The purpose of the DeFi project is to build a decentralized, more open, and easily accessible monetary system that is independent of any single controlling authority. MakerDAO, Uniswap, and Compound are three of the most well-known DeFi projects currently in development.
Non-fungible tokens (NFTs)
Non-Fungible Tokens, also known as NFTs, are a new development in blockchain technology that relates to digital assets that are one of a kind and cannot be exchanged for something else that is exactly the same.
The ownership of a digital asset and its authenticity can be verified with the help of blockchain technology using non-fungible tokens (NFTs), which can be used to represent a broad variety of digital content, including artwork, music, films, and in-game items.
NFTs are often purchased and traded in a marketplace after being recorded on a blockchain for storage. NFTs enable producers to monetize their digital work, which is one of the most significant benefits of using them, and also enable collectors to possess one-of-a-kind pieces of digital art.
NFTs also make it possible for a new kind of digital ownership to emerge, one in which the purchaser of a digital good is the legitimate owner of that good and can demonstrate this ownership via the blockchain. In contrast to the conventional model, in which the developer retains ownership of the digital item and the purchaser is only granted restricted access to it, this approach sees the creator retains all ownership rights.
The practice of selling digital artworks as non-fungible tokens (NFTs) has gained a lot of traction in the realm of digital art, which has led to a large increase in the amount of revenue generated by artists and creators. They also have the potential to be used in other domains, such as the gaming industry, the collectibles market, and the certification of ownership of real-world goods.
Stablecoins
Stablecoins are a trend in blockchain and decentralized finance (DeFi). Stablecoins are digital assets that are tied to the value of a fiat currency, commodity, or other cryptocurrencies. In the volatile cryptocurrency market, the goal of stablecoins is to provide a stable way to store value and a reliable way to trade.
There are different kinds of stablecoins, but the most common ones are “dollar-pegged,” which means they are tied to the value of the US dollar. The most popular stablecoin is Tether (USDT), which is tied to the US dollar 1:1. There are also stablecoins that are tied to other fiat currencies like the Euro or even commodities like gold.
Stablecoins are important to the DeFi ecosystem because they can be used as collateral or a unit of account for lending and borrowing, trading, and protecting against the volatility of other crypto assets.
They also make it possible to move money more safely into and out of the crypto ecosystem. Stablecoins are also used to make international payments, remittances, and other financial transactions easier because they are stable, move quickly, and have low fees.
Yield farming
Yield farming, also called “liquidity mining,” is a trend in decentralized finance (DeFi). It means giving liquidity to a decentralized financial protocol in exchange for rewards like interest or governance tokens. Users put their assets (usually cryptocurrencies) into a liquidity pool on a decentralized exchange (DEX) or lending platform.
This is called yield farming. Then, these assets are used to provide liquidity for trading pairs on the DEX or as security for loans on the lending platform. In exchange, the users get a share of the trading fees or the interest on the loans in the form of the protocol’s native token.
Yield farming lets users get returns on their idle assets and also helps to make the protocol more liquid, which makes it more appealing to traders and borrowers. In the last few months, yield farming has become very popular in the DeFi space.
This has led to the development of new protocols and platforms for yield farming, as well as new financial products like flash loans and automated market makers. Due to its high volatility and risk, however, it is also seen as a high-risk, high-return investment option. Before investing, you should do your research.
Security token offerings (STOs)
Security Token Offerings (STOs) are a trend in blockchain and decentralized finance (DeFi) that refers to the issuance and sale of digital assets that represent ownership in an underlying real-world asset, such as a stock, bond, real estate, or artwork.
STOs are similar to Initial Coin Offerings (ICOs), which were a popular fundraising method in the early days of blockchain, but unlike ICOs, STOs are regulated and compliant with securities laws. This means that STOs must follow the same rules and regulations as traditional securities offerings, such as providing proper disclosure and being registered with the appropriate regulatory body.
STOs allow for a more efficient and transparent way of raising capital and trading assets, by using blockchain technology to automate the process of issuing, tracking, and trading securities.
They also provide more liquidity and accessibility for investors, as the securities can be traded on secondary markets, and can be fractionalized, allowing for smaller investments.
STOs have the potential to democratize access to investment opportunities and make it easier for small and medium-sized businesses to raise capital, but they are also highly regulated and require compliance with local securities laws, which can make them difficult to launch and access.
DeFi derivatives markets
Derivatives are a type of financial asset that derives its value from the performance of another asset or group of assets. In conventional finance, derivatives markets are common because they facilitate the trading of financial instruments whose values are derived from those of underlying assets.
In traditional finance, however, derivatives are often created by a centralized institution. DeFi is a platform that facilitates the development and administration of derivatives on the blockchain using smart contracts, making the process open and accessible to everybody. Example: Synthetix is a platform for developing blockchain assets that are tied to other assets like equities and commodities.
Crypto ETFs
Exchange-traded funds (ETFs) make it easy for investors to buy a wide range of assets. Due to how hard it is to buy crypto assets right now, crypto ETFs would make it easier for traditional investors to buy crypto assets by letting them add digital assets directly to their portfolios without having to navigate crypto exchanges themselves.
Some crypto futures ETFs came out in 2021, like the ProShares Bitcoin Strategy ETF, which quickly had $1 billion worth of assets under management within 24 hours of trading.
Conclusion
Blockchain-based DeFi aims to make financial services more accessible and efficient. In recent years, DeFi protocols have locked billions of dollars in assets. With your knowledge of the recent trends in blockchain, be sure to take advantage of these trends and make your own cash.
