The Emergence of DeFi Platforms: The New Eldorado for Investors

Source: DeFi Pulse, February 2021
Source: Dune Analytics, January 2021
  • On Uniswap, one can purchase sETH — a token that tracks the value of shorting an ETH (Ethereum token). The process of shorting an ETH would require a series of steps which can be quite cumbersome. sETH token abstracts all these steps into a token that can be purchased and held within a cryptocurrency wallet. Its value goes up if the value of ETH goes down and goes down if the value of ETH goes up, making it very simple and accessible for any investor to short ETH.
  • On FTX, one can purchase a token that tracks Bitcoin volatility, or even purchase a token that gives you exposure to Coinbase pre-IPO contracts.
  • Decentralized exchanges (DEXs) like Uniswap, 1inch, Sushiswap and 0x. Volumes on DEXs have exploded with the DeFi hype witnessed at the end of last summer to reach close to 20% of all centralized exchanges volumes before settling below 8% which yet represents a very large increase compared to where it stood a few months earlier.
Source: Dune Analytics — 9th February 2021
  • Decentralized lending protocols such as Aave and Compound have brought innovation around flash loans, liquidity, and governance.
  • The DeFi market has proven to be thriving. Early 2020, total value locked (TVL) into the DeFi market amounted to around $680 million. The present-day TVL has increased by a factor of 50 in just over a year, locking in more than $40 billion invested in DeFi projects on Ethereum.
  • The DeFi space appears as a new generator of innovative solutions and technology advances thanks to the recent projects that have emerged in the last couple of years.
  • According to CoinMarketCap, while cryptocurrencies saw a general downward trend early 2020, the performance of DeFi projects have outpaced the crypto market, generating for their investors up to a 30-fold increase in Return on Investment (ROI) [9] since January 2020, and 7-fold since the beginning of June.
Source: CoinMarketCap — 19th October 2020 — % ROI
  • According to Dune Analytics, the number of DeFi users rose sharply by 40% in October 2020 from roughly 555,000 to 775,000, although heavy losses were recorded for certain DeFi tokens.

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