Crypto markets have started 2023 with a bang. Yet there continues to be a major debate in its world as to whether centralization or decentralization will drive crypto adoption in the future. However, decentralized finance (DeFi) is at the forefront of this argument. Today in this blog, we will learn about the current state of DeFi. Also, what might we need to track to determine its health? Here we will identify three major trends, using DeFi Llama data. If you are looking for a trading platform, you can check out The official site of BitGPTApp and register now.
1. Increased importance of Layer-2 scaling and ZK technology
The ETH merger was overshadowed by the collapse of FTX and Terra Luna when the year 2022 saw a huge drop in the market, despite the much-anticipated event taking place. Additionally, transaction speed and gas fees remain a barrier to mainstream adoption. In the coming years, however, DeFi engineers may focus on developing layer-2s and zero-knowledge (ZK) innovation, also known as “surges’ ‘. On the other hand, if we talk about zK proof, it is a kind of digital verification through which, according to analysis sites like the-ethereumtrader.com, it can increase the performance and scalability of the blockchain network very quickly.
2. Real-world asset (RWA) emergence in 2023
DeFi protocols were seen to lack the necessary infrastructure for the adoption of Real World Assets (RWA) before the year 2022, where the majority of the stake is found to be vested in the global financial industry. Furthermore, the rise in speculation in yield farming, seen in recent years, has also allowed DeFi protocols to generate revenue. On the other hand, as RWAs on-chain see further growth, they also have diverse use cases and liquidity, which present major opportunities for monetization alongside the DeFi trend. DeFi protocols are currently being encouraged to find new revenue streams by investing in real-world assets, with the reduction of farming possibilities and the fall in prices of digital assets.
3. Rise in Stablecoin Adoption, the Rise of CBDCs
CBDCs (Central Bank Digital Currencies) that have been issued by central banks have been slow to see adoption, despite their potential benefits. Consumers view digital fiat currencies and cBDCs alike, as both free to use, fast, and fully government-backed. Although CBDCs have been able to provide access to banking services without a traditional bank account, as well as enable instant international transactions, their implementation also raises concerns about government control over personal finance. situations can arise. And in 2023, if CBDC technology sees further improvements, as well as its uses are better understood, it may see more widespread adoption. However, at present, decentralized stablecoins are dominating the DeFi market and are unlikely to overtake CBDCs.
Bottom line
Looking at the present, DeFi is considered one of the most exciting advances in financial technology with the potential to become an alternative financial center with greater transparency, security, data integrity, and accessibility. However, DeFi has also passed through its early stages of innovation. It can be expected that there will be many cycles of failure and innovation before the transformative technology, as it were, can be imagined to be like the Internet. As such, this bear market has been found to provide an excellent opportunity for the market to be able to distance itself from any of the hype and puff that came with the initial boom of DeFi, as well as See what trends are in place. Furthermore, if you are a long-term investor in DeFi and are serious enough about this sector and believe that it will continue to grow in the coming years, then you should be prepared for a bear market. There may be a need to research patiently during the course so that the trends are clear.
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