DeFi

The next phase of DeFi is here

Published

8 months ago

5 June, 2024

The cryptocurrency market is entering a new phase in 2024 with renowned optimism. Having overcome the turmoil of the past 18 months and supported by recent regulatory approvals, monetary policy changes and new Web3 innovations are paving the way for a new wave of crypto innovation.

Developments in decentralized finance (DeFi) are particularly promising. As central banks signal rate cuts, DeFi yields are becoming increasingly attractive as alternative forms of investment. Additionally, new ecosystems and a new generation of protocols are introducing new financial primitives into the space.

However, to cross the chasm to widespread adoption, this phase of DeFi must differ from the last. What are the key pillars necessary for the evolution of DeFi and how are they manifesting in this market? Let’s explore.

The first phase of the DeFi market was characterized by the launch of highly incentivized ecosystems that created artificial and unsustainable returns in various ecosystems, but also laid the foundation for protocol innovations. The viability of incentive programs has often been questioned, but they have solved cold start problems in many ecosystems. Unfortunately, as market conditions changed, a significant portion of DeFi activity in these ecosystems declined and returns fell to levels that were no longer attractive from a risk-return perspective.

Another notable aspect of DeFi v1 was the dominance of complex protocols encompassing a wide range of functionality, leading to questions about whether they should be called financial primitives. After all, a primitive is an atomic functionality, and protocols like Aave include hundreds of risk parameters and enable very complex monolithic functionality. These large protocols have often led to forks to enable similar functionality in new ecosystems, resulting in an explosion of protocol forks in Aave, Compound or Uniswap and various EVM ecosystems.

Meanwhile, security attacks have emerged as the biggest barrier to DeFi adoption. Most DeFi hacks are asymmetric events in which a significant percentage of the protocols’ TVL is lost. The combination of these hacks and the decline in native DeFi yields has largely contributed to deterring investors.

Despite these challenges, DeFi v1 has been a huge success. The ecosystem has managed to withstand incredibly hostile market conditions, maintaining strong adoption levels and vibrant communities.

But can the next phase of DeFi align with new market conditions and the technological innovation needed to achieve widespread adoption?

For a second iteration of a technology trend to reach a much higher level of adoption than its predecessor, either market conditions must change or the technology must evolve to captivate a new generation of customers. In the case of DeFi v2, we can describe its adoption stages in three categories:

Developers creating new DeFi protocols and applications
Retail Investors Access DeFi from Wallets and Exchanges
Institutional investors are using DeFi for more sophisticated use cases and scale.

For developers, this new phase of DeFi is governed by impactful trends. Protocols are moving from monolithic structures to smaller, more granular primitives. I called this movement “DeFi micro-primitives” in a recent article. Protocols like Morpho Blue allow atomic ready primitives that can be combined into sophisticated functionalities.

Additionally, DeFi v2 developers will benefit from the emergence of new and distinct ecosystems such as EigenLayer or Celestia/Manta, providing new canvases for new financial primitives in DeFi. Early innovators in these new ecosystems include protocols like Renzo or EtherFi.

Institutional adoption of DeFi v1 has been primarily driven by crypto companies. For this to scale, DeFi v2 must complement its key primitives with robust financial services that lower the barriers to entry for institutions. Risk management is arguably expected to become a native primitive in DeFi v2, allowing institutions to accurately model risk-returns in DeFi. This could lead to more sophisticated risk management services.

The increasing granularity of DeFi v2’s architecture also means greater adoption challenges for institutions. To solve this problem, micro-primitives must be merged into higher-order structured protocols that provide the sophistication and robustness required by institutions. Services such as margin lending, insurance or credit are necessary to unlock the next phase of DeFi for institutions. A DeFi vault offering returns on different protocols combined with risk management and lending or insurance mechanisms is an example of a structured product suitable for institutional settings.

Regulation remains the X factor in institutional adoption of DeFi. However, a thoughtful regulatory framework is almost impossible without primitive institutional principles like risk management and insurance. In their absence, regulation by force may be the only option. From this perspective, developing institutional-grade capabilities in DeFi v2 is not only about increasing adoption, but also about mitigating existential risks for the space.

Retail investors have been the demographic most affected by the turmoil in the DeFi markets. However, the emergence of new ecosystems is increasingly attracting individual investors. Despite this trend, DeFi remains a crypto-to-crypto market. Using DeFi protocols remains a foreign concept for most retail investors, and the granularity of DeFi primitives makes it even more difficult.

The well-known secret of DeFi is that an improved user experience is essential for user adoption. However, when it comes to user experience, we can be more ambitious than just simplifying interactions with DeFi protocols. The portfolio experience has remained largely unchanged over the past five to six years. A wallet experience integrating DeFi as a core component is necessary to increase retail adoption.

Additionally, retail investors’ interactions with DeFi protocols should be summarized through simpler primitives that do not require them to be DeFi experts. Imagine, instead of interacting with a protocol like Aave or Compound, being able to request a loan with the appropriate level of collateral and protection mechanisms with just one click. User experience in DeFi is an obvious issue but one that requires immediate attention.

Macroeconomic conditions and the current state of the crypto market are converging to enable a new phase in DeFi. DeFi v2 is expected to combine more granular and composable financial primitives allowing developers to create new protocols with the emergence of robust financial services for institutions and a better user experience that removes adoption barriers for retail investors. While the first phase of DeFi was primarily driven by artificial financial incentives, DeFi v2 is expected to be more utility-driven, organic, and simpler to validate its viability as a financial system parallel to traditional finance.

Edited by Benjamin Schiller.

Fuente

DeFi

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Published

6 months ago

29 July, 2024

CoinFlix Staff

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Bonk and Pepe appear set to net new investors 10x to 100x returns over the next 12 months. However, cryptocurrencies in the DeFi play-to-earn gaming sector could offer even greater returns. As August approaches, Rollblock is emerging as a standout DeFi play-to-earn gem with the potential to 100x-1000x gains in the fourth quarter and beyond.

The project features an innovative revenue sharing model and exceptional accessibility, attracting players and investors. Additionally, Rollblock’s extensive game library of over 150 titles and enhanced sports betting are further driving excitement for the platform. Cryptocurrency analysts are expecting a sudden surge in demand. 800% a push for Rollblock from the beginning of September.

Bonk remains strong despite market fluctuations

While most well-known cryptocurrencies struggled throughout July, Bonk remained strong. As one of the highest-grossing meme cryptocurrencies of 2024, Bonk rose over 24% in July, while most cryptocurrencies experienced negative fluctuations.

Investors looking to add a relatively safe memecoin to their portfolio should consider Bonk. While Bonk is unlikely to generate explosive gains of 250x to 1,000x from here on out, Bonk could still theoretically provide returns in the 20x to 100x range.

Pepe should see a big rise in the next bull run

Alongside Bonk, Pepe has yet to go through a bull run. This means that there are still substantial gains to be made from Pepe over the next 12 months.

Pepe is down 4% in 30 days, but that shouldn’t worry Pepe investors in 2024. Experts believe Pepe’s best days are still ahead, with crypto analysts predicting a 10x to 50x surge in the next election cycle around November.

In the long term, Pepe could surpass the 100x mark for today’s investors. However, Pepe is a memecoin, and one should exercise caution when investing in purely speculative assets that have no utility.

Rollblock’s Unprecedented Hype Potential Could Push It Past 100x Valuation in Q4

Rollblock is a GambleFi Play-to-Earn token that integrates centralized and decentralized gambling on a single platform. By allowing players to earn rewards through active participation and gameplay, the platform creates a compelling incentive structure that appeals to both casual and competitive players.

With its cutting-edge blockchain technology, Rollblock offers top-notch security that keeps bets and transactions on the platform secure. The platform’s lack of KYC mandates appeals to both users who value anonymity and security.

Rollblock’s revenue sharing model, which allocates up to 30% of casino revenue to RBLK token holders, is a major draw for investors. The model involves burning half of the repurchased tokens and distributing the other half to stakers, increasing the token’s value and encouraging long-term investment.

The platform is also constantly evolving thanks to user feedback which has enabled updates such as the upcoming sports betting feature within the platform’s casino. This addition will complement Rollblock’s extensive game library of over 150 titles, ranging from traditional poker to innovative blockchain-based games.

RBLK is expected to emerge as one of the leading DeFi tokens in 2024. With a price of $0.0172 with impressive growth potential and over 140 million tokens sold recently, Rollblock is on track to enter the top 100 cryptocurrencies by Q4, making today a lucrative time to buy RBLK tokens.

Discover the exciting opportunities of the Rollblock (RBLK) presale today!

Website: https://presale.rollblock.io/

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Fuente

DeFi

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Published

6 months ago

29 July, 2024

CoinFlix Staff

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Veteran cryptocurrency investor Arthur Cheong believes the digital asset sector offers long-term holders a golden opportunity.

Cheong, the founder of DeFiance Capital, tell His 171,700 followers on social media platform X indicate that he believes decentralized finance (DeFi) is hugely undervalued.

According to Cheong, DeFi projects are innovating at a rapid pace and leaving traditional financial (TradFi) companies in the dust.

“It’s been a long time since I’ve been this excited about the risk/reward and potential upside of DeFi. This is probably the most misjudged moment since the pre-DeFi summer of 2020, with extremely promising prospects.

I see opportunities not only in OG (original) DeFi, but also in some newer projects that are evolving rapidly and growing at a pace that fintech startups will do anything to match.

The veteran investor also believes that crypto is now here to stay following recent launch from the Ethereum spot market (ETH) exchange-traded funds (ETFs) last week.

“Overall, the floodgates are open and there is no turning back. TradFi asset managers will continue to launch new crypto products because, guess what: there is huge demand for them!”

I expect them to launch actively managed crypto ETFs [in the] coming years. ”

Earlier this month, Cheong laid that it might be a bad strategy for cryptocurrencies to seek mass adoption, believing that digital assets are designed to disrupt several key financial sectors.

“I think we should accept that cryptocurrencies may not be suited for mass adoption like Web2, but rather are optimized for some narrow but very high-impact use cases like stateless global money, cross-border payments, and decentralized finance.

Chasing mass adoption of normies may be chasing the wrong Grail from the start.

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