Sectors Realizing the Full Potential of DeFi Protocols In 2020

As the new decade unreels, a new wave of disruption seems to be coming to the shores of the global financial system. That wave is called decentralized finance protocols.

Decentralized finance, or DeFi, simply refers to financial software that is built on the blockchain to make it easy for anyone to piece together digital assets and financial smart contracts. Think of DeFi as a Lego system for the finance industry.

According to Defi Pulse, an analytics site that tracks the sector’s growth, the entirety of the DeFi ecosystem achieved its highest valuation in 2019 when its value peaked beyond $600 million in June. In 2020, the value locked in the entire ecosystem has more than doubled, peaking at a value of $1.2 billion.

The potential of DeFi protocols

Incidents such as the global financial crisis of 2008 highlight serious weaknesses in the traditional global financial system. DeFi is emerging as a palatable solution to provide an alternate future for the traditional financial sector. 

In fact, beyond the finance sector, DeFi has the potential to increase innovation as well as improve operational efficiencies in various ways. As DeFi applications widen across different sectors and industries, more and more investments are steadily pouring into the DeFi ecosystem.

Related: DeFi Begins to Move From a Niche Market to Mainstream Finance

The DeFi ecosystem has largely been populated by Ethereum-based protocols as a result of its early beginnings at the tail end of 2018 with the launch of MakerDAO. However, more diversity is underway as the sector matures and increases in liquidity, a report says.

From decentralized credit and lending systems, predictions markets and asset management, DeFi’s applications have caused quite a stir in the mainstream space for their capacity for enabling multiple efficiencies. As DeFi solutions continue to grow while bringing about financial inclusion and empowerment, here is a look at the sectors where DeFi is flourishing in 2020. 


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