Decentralized Finance, or DeFi, is becoming increasingly important to millions of people as they leave the traditional centralized financial institutions (CeFi) that have until now dominated activities including investing, loans, savings accounts and even regular checking accounts and merchant services. This CeFi to DeFi shift first gained momentum earlier in the year before cooling off only to rebound in recent weeks.
The total value accrued (locked) across all DeFi projects, the biggest of which include Celsius, BlockFi, Yearn Finance, and others, has surged dramatically this year from $700 million early in the year to a record high of $14 billion on the back of several key features that have distinguished the projects’ tokens from the pack of so-called altcoins (those that aren’t bitcoin).
This migration of capital to DeFi protocols has resulted in over $14 billion worth of digital assets ‘locked’ into their projects, with around 150k Bitcoins now locked onto the Ethereum network, a trend that’s accelerated rather quickly in recent months. This development in itself will serve as a further liquidity boost for the decentralized ecosystem, as centralized exchanges are fully aware of the growing interest in all things DeFi and have been more willing to list related tokens.
… DeFi projects also let people take out loans against their digital asset holdings, and receive fiat in return, often enabling them to put their capital gains to work in the offline world. People and institutions have begun to increasingly look to DeFi projects as a way to generate returns even in a mostly down crypto market (prior to the recent bull run, that is.)