Reasons Behind Growth in DeFi Trading Despite a Downturn in The Economy

Reasons behind growth in DeFi trading despite a downturn in the economy

TL;DR Breakdown

  • Decentralized finance has recorded massive growth since the beginning of 2021.
  • DeFi applications cover a wide range of financial services.

One of the top trends in the crypto world in 2020 was decentralized finance (DeFi). As of January last year, the industry’s total locked value was less than $1 billion. However, that figure has more than tripled by the end of the year, recording over $20 billion in such funds. The reason for this could be tied to an increased interest in the sector plus a deepening level of trust in the space by investors.

With this growth level, DeFi has seen quite some new products, services, and platforms develop from the space. The sector now favorably competes against the traditional financial system with its groundbreaking innovations that have brought more financial inclusivity to everyone with access to smartphones and access to the internet.

DeFi presents a viable alternative to the conventional financial system 

DeFi removes the need for an intermediary and a central regulatory body. Most of the system depends on Ethereum based smart contracts that automatically look to enforce any agreements in such contracts. In this way, DeFi presents a viable and robust alternative to the conventional financial system.

The industry’s ability to also allow for transactions to be carried out in a fast, secured, and seamless manner also gives it an edge over the usual financial system. And to top, it is the fact that transactions are cheaper in this sector. Usually, transacting in the conventional system can be delayed, tedious, and might even request paperwork that makes these transactions very expensive. All of these are easily avoided with DeFi.

dApps cover a wide range of niches

DeFi applications (dApps) cover a wide range of financial services niches, with some dedicated towards lending and borrowing, while some are geared towards the insurance sector. Some also provide a kind of protection against the volatility that is attached to the general crypto industry. All an investor needs to do is to pick a desirable system he would want to invest in.

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