DeFi Brings Blockchain Technology Closer To Mainstream Adoption

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August 7, 2020 by
DeFi Brings Blockchain Technology Closer To Mainstream Adoption

With the emergence of Decentralized Finance (DeFi), the characteristics of cryptocurrency which qualifies it as an asset and a store of value appears to be becoming more obvious. Many cryptocurrency users prior to this time would simply liquidate their assets completely in order to access any form of financing. Today, with the advent of DeFi, lending and borrowing using cryptocurrency outside a centralized system has become possible.

Bitcoin is the first cryptocurrency ever to exist. However, just as expected from the early days of Bitcoin, many other cryptocurrencies have come into existence, individually providing some extent of alternative solutions. While a good number of these cryptocurrencies were forked off the Bitcoin blockchain, others were developed on totally different protocols.

Out of all the other blockchains and cryptocurrencies to emerge after Bitcoin, Ethereum can be argued to stand out as the biggest so far. The ability of Ethereum to enable DApps creation stands out in making it a popular project. As a result of this, the user base that the Ethereum protocol has attracted is huge. This started from the days of the ICO, and now we have been introduced into yet another era, DeFi.

As mentioned above, DeFi appears to play the significant role of letting cryptocurrency users explore the use case of their cryptos as assets. Meaning that with DeFi, you can easily and directly use your cryptocurrency to access loans and other facilities in a decentralized network with your cryptos still intact. This development, as simple as it may appear, brings to reality the full description of cryptocurrency as digital gold.

Much More Than Lending and Borrowing

Although lending and borrowing is making DeFi popular, Chimezie Chuta, founder and coordinator, Blockchain Nigeria User Group (BNUG) makes it clear that DeFi is way beyond just the two. According to him, it is a novel innovation that is leveraging decentralized networks to transform old financial products into trustless and transparent protocols. This innovation enables those protocols to run seamlessly without intermediaries. So it will include finance, insurance, derivatives markets, KYC etc. Chuta notes that Identity and Asset Tokenization will also benefit from DeFi.

In his own way, Chuta defines DeFi as the application of Decentralized protocol applications to solve financial problems without the need of a middle man. 

DeFi is still in its infancy just like Decentralized Digital Assets. There are still a lot of issues that need sorting out to really arrive at that true ‘decentralized’ level everyone desires. One of those is the issue of Oracle. Another is custody of funds.

Until DeFi achieves zero centralization in these two areas mentioned above, Chuta believes that it will continue to struggle for mass acceptance. However, he points out that other issues like cross-chain interoperability are being addressed by different projects. 

Blockchain Awareness is Moved by Applicable Solutions

While we can agree that the awareness of blockchain and cryptocurrency has increased significantly in the last few years, to a large extent everything still revolves around the same circle of users. Local and international communities could be vibrant, but expansion by these communities is no longer as fast as it used to be.

Before, blockchain conferences played a big role in generating most of the awareness that the industry has achieved. However, present day realities may not permit such traditional summits and people gathering together for such purposes any longer. Even if it does, there seems to be a natural expansion mechanism that has outgrown those kinds of events. Today, what moves the awareness and adoption of blockchain and cryptocurrency is practical solutions that are applicable in the mainstream.

Earlier in this post, we pointed out how DeFi protocols are enabling crypto users to actually apply their assets in finance without necessarily liquidating them. These are the kind of implementations that can push even more awareness and adoption of the technology. Also, as pointed out by Chuta, the various other aspects where DeFi can find application could further expand the net, and the reach for the technology.

We have seen the era of exchanges and other gateways that enables crypto users to extract value from their assets. Perhaps, we are entering the next layer of development where several other mainstream models will experience blockchain and crypto implementation. DeFi, as it is today is a working progress. Several aspects of it are being polished and fine-tuned. 

We have seen DApps and Smart Contracts. Today we are seeing DeFi, and there will surely be many more to follow. The interesting thing is that such is the natural pattern for the achievement of sustainable development. Think about the early days of the internet, and how technology has evolved over time. It is all about steady development, and finding ways to adapt into the existing systems until total change is achieved.

 

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