Darius Moukhtarzade is a researcher at Sygnum, the world’s first digital asset bank. Prior to Sygnum, he worked for Ernst & Young in blockchain consultancy and for several startups in the Swiss Crypto Valley.
Undoubtedly, NFTs have received the most attention in the crypto space in 2021.
While some market observers had foreseen their rise in popularity and use a while ago, their skyrocketing adoption among both traditional and crypto-native players took most of us by surprise. The hype around punks, apes, and rocks overshadowed even the thriving DeFi sector.
Yet I expect that DeFi will come back into the spotlight again next year, experiencing a second “DeFi summer” as it did in 2020 for two main reasons: yield opportunities are likely to be more sought after, especially in a sideways or a bear market scenario; and the establishment of a regulated version of DeFi, which I will call RDeFi.
Attractive yield opportunities
Since the “DeFi summer” of 2020, many new and innovative projects have emerged while the established ones further developed their offerings. A trend that we already saw this year especially in the first half was different types of yield generation as DeFi offers very attractive yield opportunities ranging from conservative products between 3-5% and with more aggressive ones between 30-40% on stablecoins depending on the investor’s risk appetite.
Many new joiners to crypto who entered the space in the recent bull run will start exploring DeFi. For some, it will be the “traditional” path from Bitcoin to Ethereum and then DeFi. For others, it will be from NFTs to Ethereum and then DeFi.
Regardless of whether someone started with the mother of all coins or with a cyborg shark, the result will be the same: increased adoption of DeFi which could lead to a DeFi 2.0 summer.
Evading high gas fees
Even though the ETH 2.0 update is planned for the first half of next year, I believe that Ethereum will still deal with very high network fees for most of the year.
This will not stop DeFi adoption but push investors to use even more Layer-2 scaling solutions such as Arbitrum, Polygon, or Optimism and alternative smart contract platforms such as Polkadot, Solana, Avalanche, or Terra.
I am very excited about Polkadot’s DeFi platform Acala, which recently became one of the first projects to get a parachain slot on Polkadot. Also, Solana, which gained a lot of NFT share from Ethereum due to lower network fees, will be interesting. Its high TPS and scalability allow DeFi applications that would not be possible with Ethereum.
The emergence of ‘RDeFi’
I believe that in 2022 we will see the emergence of RDeFi, “Regulated DeFi”.
This may sound like an oxymoron to some, but I see it as the next evolution of DeFi. I expect that alongside the DeFi that we all know and love, a parallel DeFi sector will emerge, mirroring its rebel twin but with a regulated wrapper around it that matches the regulatory requirements in traditional…
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