As the term suggests, decentralized finance is the fast-growing field of decentralized finance tools and platforms, many of which provide access to crucial services that are hardly available in many regions. As a rapidly growing industry, the decentralized finance landscape is evolving at a pace few can keep up, with ever newer applications and products appearing to emerge on a daily basis. But amid the craze, various trends are starting to emerge in the DeFi space, which looks set to set the tone for what’s to come.
Value in the real world
Until recently, decentralized finance was the domain of cryptocurrencies and tokens (fungible and non-fungible). Beyond simple links to the world of traditional finance (TradFi) via oracle services and fiat to cryptocurrency gateways, there was little connection between DeFi and TradFi. But this is beginning to change, as a number of up-and-coming upstarts attempt to bridge the gap between the two financial spheres to produce a range of increasingly capable DeFi applications.
Among them, BondAppétit is emerging as innovative. The platform offers a dollar parity stablecoin that is backed by real-world debt instruments that generate a fixed income. The stablecoin, known as Appetite USD (or USDap), is unique in that it has liquidity funds backed by real cash flow, ensuring users the assurance that their funds are backed by more than just Simple dollars depreciating in an escrow account somewhere.
Although cryptocurrencies can be valuable due to their scarcity, usefulness, collectibility, and myriad other reasons, retail investors, businesses, and governments are used to more traditional financial instruments. By bringing them closer to the blockchain through a series of novel DeFi applications, we can open it up to more traditional financial players, who have the ability to help its expansion to the masses.
Composibility in DeFi
Composability has become a buzzword lately. Without going into too much detail, it is the property that allows different DeFi applications, products, tools and services to be connected to form more elaborate application networks, which can achieve more than any application that works on its own.
It is also becoming a prime target for DeFi applications, both new and established, looking to stack with other applications to offer additional functionality to users and explore increasingly innovative use cases. Being decentralized, users can take advantage of the capabilities of multiple DeFi applications in tandem to do more with their cryptocurrencies, maximizing their returns, increasing security and managing their assets in ways that were not possible before.
As a result, DeFi is becoming more like the world’s traditional financial services, in the sense that using one service (e.g. PayPal) automatically opens access to dozens of others, such as e-commerce, personal payments. , online insurance services, etc. This has the effect of reducing uniqueness and increasing utility for users of all services involved in a DeFi application stack.
In short, it makes the cryptocurrency sector more accessible and intuitive.
Currently, there are numerous platforms that incorporate composibility into their modus operandi, such as Kira, a blockchain that allows users to bet on assets from a wide range of other blockchains, and Premia, a platform that allows Users create and trade options for a number of supported cryptocurrencies such as Lego-like ERC1155 tokens, which can be used in external DeFi applications.
Safety is in the spotlight
The cryptocurrency industry is built on the premise of security and self-sovereignty above all else – it is the reason why cryptocurrencies such as Bitcoin (BTC), Monero (XMR), and Terra (LUNA) have achieved success. so amazing.
But while the technicalities of keeping a blockchain secure are largely based on the focus of strength in numbers offered by battle-tested consensus mechanisms such as Proof-of-Work (POW) and Proof-of -Stake (POS), the security of DeFi applications is also based on the integrity of the underlying code, which can vary considerably in its scope and effectiveness.
As a result of this variability, several poorly protected DeFi applications, such as PAID Network, Dodo, and Pickle Finance, have been exploited in the last six months, suffering multi-million dollar losses. Guilty? Poor code (in most cases).
However, for the sector to grow stronger, you always have to set an example with platforms that do not go far enough to secure users or their funds. The failure (and potential recovery) of these platforms sets the tone for fellow innovators, who know to push themselves and prioritize security before launch, rather than leaving it as an afterthought.
Fortunately, the pace of these attacks has slowed markedly in 2021, as users demand proper code review, thorough security audits, and real purpose before using new applications.