The biggest bright spot in the blockchain field in 2020 is to focus on decentralized finance (DeFi). On January 1, 2020, the total value of DeFi locked positions was 690.9 million U.S. dollars. At the time of writing this article, it had skyrocketed to a staggering 11.73 billion U.S. dollars. In September alone, its total locked positions tripled monthly.
For newcomers, DeFi refers to the use of blockchain, cryptocurrency, and smart contracts to provide access and inclusiveness for those who are blocked from the current system due to geographic, economic, and financial barriers. The DeFi platform belongs to the category of distributed applications (dApps). It is built on a blockchain rich in smart contracts-mainly the Ethereum network.
Chainalysis, a blockchain analysis company, predicts the digital growth in the DeFi field in 2020.
DeFi platform weekly total value comparison
DeFi growth mainly occurred after June, but from a macro perspective, the growth has started since the beginning of the year, but since June, the growth rate has been so huge that it pales in comparison with the growth of the previous five months. After a brief slowdown in October, things are now improving again.
DeFi platform weekly income comparison
Decentralized exchanges (DEXs) are the most popular type of decentralized applications (dApps). Obviously, Uniswap (version 1 & 2), Kyber, Curve Finance and 1inch Exchange accounted for most of the growth.
The total value and quantity of DeFi platform transfers
The total amount received by the DeFi platform in 2020, including the total amount of transfers and the number of transfers. It can be seen that most of the participants are retail investors, and it can be seen from the higher number of transfers that the number of transfers in the $100-1k range is the highest. Nevertheless, institutional investors seem to be promoting the development of this market area, with the highest transfer amount in the 10,000-100,000 range, followed by the 100,000-1 million range. It is worth noting that the number of transfers of large capital investors in this range is shrinking.
DeFi platform illegal total value
The first three figures highlight the tremendous growth of DeFi, and this last figure is equally disturbing, perhaps not surprising. Although the value of stolen funds and fraudulent funds peaked in October, the proportion of illegal transactions was only 0.05%. Compared with the peak of 1.00% in May, the sharp drop in the percentage was attributed to the rapid growth of the overall market. From this perspective, if the total cryptocurrency transaction volume received or sent by addresses related to illegal activities is 1.1%, 0.05% is a fairly small number.
Unlike centralized financial institutions in the traditional financial system, DeFi platforms are at least theoretically managed by self-executing code. They generally do not control user funds, but work and operate between various wallets according to the platform’s underlying protocol.
Although the functions of the DeFi platform are not like traditional currency businesses, and may not be under the current regulatory and compliance requirements, there are still outstanding issues such as the audit of the platform code, the liability for financial crimes and other vulnerabilities.
