Introduction
Some exciting new decentralized finance (DeFi) projects are expected to be seen in 2023, with the concept of DeFi getting more mainstream and popular. Investors have actively backed DeFi projects in the past, and with new regulations in the sector in quite a few countries, the crypto and finance community anticipates much more innovations and trends coming up in the subsequent year. DeFi has brought drastic changes to the basic notion of finance and services, with 2023 revealing more insights into the exciting new trends. This post explores the various DeFi trends in 2023 that are expected to be very popular.
What is DeFi?
Decentralized finance, commonly known as DeFi, is a composite term used to denote many financial products or platforms that allow users to use financial services without the help of an intermediary or a third party. These platforms may be built on various blockchains, such as Ethereum or Bitcoin, and thus can facilitate the transfer of value or wealth, enabling users to utilize decentralized forms of traditional financial products like loans, insurance, and more.
It is a known fact that the financial world has been monopolized by certain companies and firms that have gained immense wealth and power in the process. Equity and bond markets are dictated by such companies, who wield great influence in many sections of society. The need for a decentralized concept of finance is, thus, an urgent requirement to issue equitable power in the hands of all users.
DeFi applications can allow users to be a part of a crypto economy that will only get bigger with advancing times. Without any hurdles in transferring money, users could get absolute ownership of their wealth without any external intervention. DeFi offers a secure and more transparent platform to users, reducing the scope of scams and fraud in the process.
Top DeFi Trends in 2023
With the onset of a new year, the crypto community is eagerly awaiting the various DeFi trends in 2023 that will create breakthroughs in the financial sector. Let’s look at some of them:
- Conventional financial products’ debut in DeFi: People use various financial instruments worldwide to invest their money, transfer wealth, and for other services. The derivatives markets of the world are worth trillions, with traders and investors constantly involved in them. Though the DeFi derivatives markets still haven’t matured, the scope is huge, and crypto communities expect DeFi derivatives to make a huge splash in 2023. The unique factor of this concept of letting anyone create a DeFi derivative on a blockchain using smart contracts would incentivize more people to explore the space. Projects like Maker and Uniswap have been pioneers in this field. Other financial instruments, such as exchange-traded funds (ETFs), are also gaining solid ground in crypto and DeFi. Crypto ETFs would encourage wider adoption of digital assets amongst the masses and make it easier for them to adopt and explore new crypto projects. Other traditional financial instruments like insurance, tranche lending, and collateralized lending would also contribute to DeFi trends in 2023.
- Increased popularity of governance tokens: A host of crypto projects issue tokens these days for participants. The sole purpose of such tokens is to govern the protocol and provide voting rights to the token holders. These holders vote on initiatives for the underlying blockchain protocol for its progress. A DeFi protocol may also allow their token holders to perform various activities on the native project and use their tokens to perform financial tasks such as lending and trading. As the protocol grows in size, the value of the tokens may increase. Major DeFi projects like Compound and MakerDAO have seen the value of their governance tokens surge to billions due to their popularity.
- Cross-Chain technology: Exchanges, traders, and investors alike have been facing the problem of ever-increasing transaction fees in various blockchains. The most prominent amongst them, the Ethereum gas fees, has discouraged many users from actively participating in DeFi protocols. Cross-chain technologies in DeFi have tried to solve this problem by allowing users to transfer smart contracts and transactions from one chain to another. Polkadot has made significant progress in this space, allowing cross-blockchain transfer of assets like tokens and data, making the process much more efficient.
- Monetization of gaming: There is an undeniable potential for DeFi in the gaming industry. With millions of gamers worldwide looking to monetize their skills, DeFi offers them a chance to do so. Games built on blockchains would allow users to mine their native tokens, buy accessories and further increase their value with the rising popularity of the games. Developers and gamers have supported the transferability of assets between games, leading to more such games going into development in 2023.
- DEXs: With the entire crypto community growing wary of centralized exchanges, decentralized exchanges (DEXs) are expected to grow much more popular in 2022. DEXs are major proponents of DeFi, where users trade with each other directly, devoid of an intermediary exchange. DEXs like Uniswap and Curve hold the majority share of the DEX market, and this will only get bigger in the future. Volumes in DEXs have grown to billions and continue to rise regularly. DEXs solve the issue of liquidity faced by centralized exchanges through automated market makers (AMMs), through which a liquidity pool is created. It creates a win-win situation for all stakeholders in the DEX.
Conclusion
DeFi trends in 2023 will disrupt the concept of traditional finance. Increased efficiency, transparency and decentralization will be the hallmarks of a good DeFi protocol, scrapping monopolies in finance. With a difficult year gone by for the entire crypto community, one hopes for increased positivity for an exciting year ahead with new cutting-edge DeFi projects.