The latest decentralized finance (DeFi) aims at creating new business solutions built on distributed, permissionless networks. A Binance Research study shows that DeFi has grown spectacularly in less than a year.
Ethereum-Based Defi Apps Are Worth over $500 Million
On June 6, 2019, Binance Research released a study focusing on platforms and lending and borrowing protocols that intend to radically change the financial industry, such as DeFi.
Researchers define DeFi, as follows:
An ecosystem comprised of applications built on decentralized networks, permissionless blockchains, and peer-to-peer protocols for the facilitation of lending/borrowing or trading with financial instruments.
Bitcoin and Ethereum networks were the first networks to run DeFi applications. Presently, most of the DeFi protocols run on Ethereum.
According to the study as of June 5, 2019, the value of Ethereum-based DeFi applications reached over $500 million. And DeFi applications running on the Bitcoin network amount to approximately $8 million.
Most surprisingly however, EOS has surged as the largest network running a DeFi application, in terms of collateral value. EOS boasts more than $600 million locked by its blockchain, as of June 5, 2019. The chart below refers.
The study highlights that DeFi platforms offer different incentives for market participants. Specifically,
• For borrowers: the ability to short an asset or borrow utility (e.g., governance rights).
• For lenders: the ability to insert capital to use and earn interest.
• For both: arbitrage opportunities across platforms.
“DAI Is One of the Central Components of the DeFi Ecosystem”
The wide range of assets supported on Ethereum-based platforms comprises two categories: native blockchain assets and non-native block assets.
Native blockchains assets are defined as assets whose value is not backed by any non-native blockchain asset such as a commodity, equity, or fiat currency.
MakerDao (MKR) and its DAI stablecoin is an example of a native blockchain asset. DAI’s value is pegged to the U.S. dollar through smart contracts. The study stresses that DAI is one of the most significant components of the DeFi ecosystem built on Ethereum.
Other examples of native assets include ERC-20 tokens, such as Augur (REP), Basic Attention Token (BAT), and 0x (ZRP).
These crypto-assets can be used as collateral for a loan, lendable assets, borrowable assets, and governance assets (e.g., Maker/MKR).
Conversely, non-native blockchain assets are stablecoins collateralized by fiat money on bank accounts.
One of the Most Active Sectors of Blockchain in 2019
The study finds that Ethereum is currently the standard default platform for many decentralized applications, such as the lending and borrowing protocols, Compound and Dharma. Both lending platforms have seen constant growth since their release.
In less than a year, DeFi has grown to become one of the most active sectors of blockchain in 2019, according to Concensys.
Moreover, the Binance Research study forecasts,
DeFi, as illustrated by these lending and borrowing platforms, appears as one of the best use-cases of blockchain technology which could reach up to billions of users across the globe and allow access to basic financial services at efficient rates.