Next DeFi Trends
Crypto bridges
Cross chain technology aims to solve the problem of not being able to trade across different blockchain platforms. Currently, developers are working on two types of crypto bridges. The first type is called a trusted bridge, which involves a central authority that transfers native coins or tokens between blockchains. The second type is called a trustless bridge, which uses smart contracts and trading algorithms to facilitate cross chain transfers.
Both types of bridges come with inherent risks. Trusted bridges involve sending money to a third party, which can be subject to censorship or scams leading to losses. On the other hand, trustless bridges require flawless smart contracts and code to prevent hackers from exploiting vulnerabilities. Despite these risks, both technologies are emerging and can be used judiciously. As they become more widely adopted in the crypto market, their use will become more commonplace.
Connect with CeFi
The integration of traditional finance into decentralized finance is taking place in innovative ways. With the advancement of blockchain protocols, it has become possible to transform real-world assets such as corporate credit and mortgages into crypto assets.
Blockchain gaming & finance
The use of non-fungible tokens (NFTs) for in-game purchases is an exciting new development. Finextra reports that more than one billion users are already involved in the trading, buying, selling, and winning of in-game assets. The video game industry has experienced consistent growth in the past decade, with games such as Fortnite generating a significant portion of their revenue from in-game skin purchases. This trend has continued into the early 2020s, and now there is a growing interest in the creation of digital assets that can be transferred between games.
DEX are changing
The early part of 2021 saw decentralized exchanges achieve tremendous success, with a trading volume exceeding $60 billion. As these decentralized exchanges continue to expand, the primary challenge is to maintain their cost-effectiveness and time efficiency. The growth of these exchanges has been fueled by the use of automated market makers (AMMs).
Governance tokens
DeFi platforms are increasingly providing their own governance tokens that function differently from native tokens. These tokens grant voting power to holders in decentralized autonomous organizations (DAOs), allowing them to govern the development of the DeFi protocol on their platform. These social tokens enable investors to have a say in the direction of the platform’s development over time, with the value of these tokens increasing as more people acquire and hold them.
Expansion of Crypto exchanges
Although there are over 20,000 digital currencies in circulation, only a small percentage of them are available on exchange platforms. Currently, Coinbase, the largest centralized exchange network, offers approximately 450 currencies for trading, while Kraken, the second-largest, offers 160. An area that can be improved upon in 2023 is expanding the range of coin offerings on major exchanges.
More Regulations
According to cryptosec.info, the DeFi space has experienced losses of approximately $2.4 billion as a result of hacks and exploits. Decentralized exchanges are undoubtedly vulnerable to various risks, including fraudulent schemes and hacking attacks. Despite these risks, there is a divide within the crypto community regarding the potential benefits of regulation.
Some argue that regulation would involve third-party intervention, potentially compromising the decentralized nature of the market. This could take various forms, and the complexity is further compounded by varying financial regulations across different countries and regions.
Crypto Insurance on rise
Traditional banking insurance policies have been in place for almost a century, but there are no established insurance policies for digital assets. Nevertheless, there is a growing demand for DeFi insurance policies.