DeFi Predictions 2023 – Our Top DeFi Trends for Next Year

BeInCrypto anticipates that the coming year will see decentralized finance (DeFi) evolve in terms of financial integration and personal identity.

While 2021 saw the growth of cryptocurrencies and Web 3, including DeFi, the past year saw these advances regress. Crypto valuations plummeted, causing many companies to fold, leading to further collapses and revelations of massive frauds. Nevertheless, as DeFi perseveres, these events helped shape how it would evolve over the course of the next year.

centralized exchange failure

The year saw the failure of several centralized exchanges (CEXs), most notably the collapse of Sam Bankman-Fried’s FTX. As customers face a long, uncertain process to retrieve their assets, many have become wary of these platforms’ lack of transparency and control. As a result, decentralized exchanges (DEXs), a key feature of DeFi, have great potential for growth.

Although DEXs are often complex and require more due diligence from the average user, they transparently enable them with complete control. Rather than entrusting their funds to a corporation, users have complete visibility into how the platform is storing and investing their assets. Therefore, 2023 could potentially be a breakout year for DEXs, with potentially more innovative functions coming to applications and platforms.

decentralized finance

Likewise, a growing number of investors will also begin to understand the difference between DeFi and its traditional, centralized counterpart. One reason is the ease with which claims can be refunded through DeFi protocols. For example, the only creditor who managed to reclaim their assets did so through smart contracts. This was the case when Celsius and Alameda Research repaid their loans using collateral posted to borrow dollars.

Through the use of smart contracts, DeFi transactions are trusted and fairly arbitrated using cryptographic methods. Meanwhile, in CeFi, transactions are subjectively arbitrated by humans, as are any failures, which are usually caused by human error. Unlike the case with FTX, for example, smart contracts do not require the arbitration of external third parties.

institutional integration

As investors begin to trust with the ability to use smart contracts, there will likely be more integration of DeFi within CeFi. For example, JPMorgan has made great strides in its blockchain-based development through its dedicated unit Onyx. The investment bank also conducted its first DeFi transaction earlier this year in partnership with the Monetary Authority of Singapore.

Many also believe that the size of the FTX collapse will trigger legislation that could accelerate the adoption of blockchain technology. To this end, CeFi’s existing infrastructure will enable institutions to interact with DeFi applications while remaining compliant. Steps taken by JP Morgan and other financial institutions this year indicate more consolidation in the coming fiscal year.

decentralized identity

Nevertheless, DeFi will also play a central role in the development of digital identity as CeFi finds ways to further integrate blockchain-based methods. This past year, several tools have emerged that explore the interactions between social networks, reputation, and decentralized identity, including projects such as Soulbound Token, ENS, POAP, and Lens. This focus on prestige and identity is consequently likely to increase in 2023.

This will also be facilitated by the growing use of digital wallets and non-fungible tokens (NFTs), both of which have found more use cases in the past year. For example, the public gained greater awareness of digital wallets this year through their introduction by large social media companies such as Reddit, Instagram and Twitter. As of November 2022, approximately 80 million crypto wallets have been created, of which some 6% have interacted with DeFi. The growing wallet adoption trend will therefore easily contribute to the growth of DeFi next year.

Meanwhile, as unique identifiers, NFTs will also play a role in DeFi, helping to establish decentralized identity. For example, users may one day contribute NFTs of assets as liquidity to a decentralized exchange’s liquidity pool. They could also borrow cryptocurrency against that NFT to invest in other yielding products.

In addition to direct DeFi applications, NFTs can also see use in licensing licenses and academic credentials. Verifiable Credentials will also become a standard for off-chain credentials and verification, with the first iteration of such scalable reputation systems using tools such as Metamask Snaps, DID and VC.


BeInCrypto has reached out to the company or the person involved in the story for an official statement regarding the recent development, but has yet to hear back.

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