Transition from Centralized Governance to Decentralized Finance

DeFi, which is rapidly growing recently, is an abbreviation of Decentralized Finance, which means decentralized finance using virtual assets based on block chain technology without intermediaries. Unlike the existing financial method, it refers to a platform where all participants can use financial services through systems and algorithms without financial institutions.

DeFi uses blockchain technology, but is different from FinTech, which is operated based on fiat currency in a centralized system, and Centralized Finance (CeFi), which is finance based on virtual assets but is centered on virtual currency exchanges.

With the boom in digital asset investment in DeFi over the past few years, starting with MakerDao in 2017, interest around the world in DeFi platforms such as Uniswap and COMP is at its peak. Funding has surpassed $41.8 billion as of March 2021.

In particular, according to the prospect that negative trends such as zero interest rates in the existing financial sector, monetary easing policy, and negative impacts from the pandemic will continue, the yield farming strategy using virtual assets has come as an attractive form of investment.

DeFi amount deposited in recent years

In the field of DeFi service, lending is currently the highest at 47%, and decentralized exchange (DEX) is at 36%, and areas are gradually diversifying into asset management (Assets) and derivatives (Derivatives).

Set Protocol DeFi Pulse Index (DPI)

Currently, overseas-based platforms account for most of the share of DeFi services, and DeFi companies such as have been established in earnest in Korea since 2019 to partner with Bithumb, a virtual asset exchange, to provide loans and loans of virtual assets. It provides a deposit service, and as of March 2021, it has grown into the largest company in Korea with a deposit amount of KRW 1.9 trillion (USD 1.69 billion).

In addition, big tech companies such as Kakao and Naver are also trying to expand into the DeFi business through their subsidiaries in charge of the blockchain business.

The recent growth of the DeFi market is raising expectations for the possibility of institutionalization of virtual assets as institutional investors and global companies continue to purchase virtual assets. The scale is rapidly expanding, and in particular, as the US Securities and Exchange Commission (SEC) approved Bitcoin futures trading on Bakkt, a futures exchange, expectations for the use of countable assets have increased.

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