2020 — Is it the year of Defi? Reasons behind the massive boom in Defi projects
By coinbreze on The Capital
With the decentralized financial sector in Ethereum booming in 2020, it appears that the crypto-economics is once more entering a bull market two and a half years from the last bull market in crypto finished in January 2018. Since then, of course, a lot has improved. Ethereum already has more exchange fees than Bitcoin, as evidence DeFi’s top ventures eventually find that the commodity demand balanced the increasing amount and the Connection token of Chainlink has developed into a top-five coin per market capitalization.
In other words, the Ethereum ecosystem runs a crypto bull in 2020, as did the ICO boom in 2017 when the smart contract platform exploded. The distinction between then and now is that Ethereum’s structures — and its technologies — are now significantly stronger. However, several of the crypto challenge and pitfalls in 2017 are equally relevant to our current cyber-economy, although new encryption mechanisms have since been implemented to ensure new kinds of surveillance.
Now, Defi projects like Chainlink, Aave, Maker, Synthetix Network Token, etc are booming in the past few days. Experts have been analysing the true nature of the growth of the decentralized financial system. However, there may be lots of potential of decentralized finance system to gather the attention of the market. Well, seeing the current market status it is difficult to understand in which way the wave will lead the crypto market. Since the decentralized finance is attracting the attention of the market by alluring the most prosing support of the investment, the market initially observing the growth.
Here is the list of top ten Defi projects according to Market Cap status at the time of writing.
From the top four of them actually hold more strength among others. In the whole crypto Market Chainlink, Aave, Maker, Synthetix Network Token are now holding the ranks 5th, 27th, 28th, and 30th respectively. That means these projects show much more potential than others.
Now, we should check how Defi market is booming based on Chainlink’s price fluctuation. It seems within three months Chainlink's price grew from 4 dollars to 20 dollars (approximately). This value focuses on 400% growth in the Chainlink’s market capacity. Still, there are many rules which are needed to be followed for keeping potential earning from the Defi investments.
This year, DeFi’s big hit was yield agriculture where protocols reward users for their liquidity supply. New forms of crypto native earning incentives come with this trend but also new threats. In a bull market, obviously glamorous ideas prevail but the danger is still there. Take the time to take a serious look at and choose what projects you are prepared to take part in. Alternatively, you might risk anything if you seek to find some economic potential.
Whenever crypto-economics proves to be profitable, scammers begin to grow. There is simply the profit motive. Wait for more malicious actors in the next few months if crypto keeps heating up. Malicious actors who create reputable protocols and try to attract new users to “new projects,” through cheap riding on the coattails of other teams, have one thing to watch for. In brief, stop it at all costs if a proposal is too perfect for it to be valid and entails unnecessary risks.
Now here is a chart of growth in the Defi market in the past three months. Now, Defi market dominance increases over 21% at the time of the market. Total Value locked in USD is 6.6 billion dollars approximately according to Defi Pulse.
So how do you think we can overcome the flaws and choose a great investment option in the Defi market? Simply I can say that information can play a major role to attract market attention. A consumer of the crypto economy is just as nice as their data. This is why knowing where to find reputable information streams is extremely important.
Fortunately, for all of us, a lot of big resources are now freely available in analyzing blockchain activity, such as Ethereum or Bitcoin, to the public.
Jargon metrics in the cryptocurrency space are not lacking, but they are not too difficult to grasp, and the fundamentals are important to understand. To evaluate the strategical investment one must follow the basics like volume, total value locked, Dominance rate, fees circulating total supply. These are the main factors to observe to play a fine trade in the decentralized financial system.
Another thing you must be aware of that is the community of the projects. In the communities of projects you are interested, you will want to keep your ear on. The best way to do that is to visit locations where people meet to chat.
Twitter and Reddit are prosperous centres for community crypto activities in social media. But you will also consider downloading chat apps such as Telegram and Discord because many projects have chat sessions in their own right, which can be useful information for gold mines and fellow students.
Above all the scenario security has come with major priority. A lot of enjoyable tests are now possible in order to partake in crypto, but health will still be the front line of the mind.
Remember, for starters, to protect the investments with a hardware wallet. Be careful with phishing attacks and never enter the seed phrase of your wallet anywhere online. Prevention of sketchy web pages and sketchy programs is also mandatory. It’s definitely too good to be true if someone offers a deal that is outrageously good for you.
Cryptocurrency prices can rise fast and fall just as fast. This is not to say that in the crypto economy, you should always expect extreme volatility. Not surprisingly, prices are moving quickly in a specific direction, it is most certainly sometimes and often to a higher extent than traditional markets would typically be.
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