Crypto Ecosystem 2020
By n.exchange on The Capital
Mainstream
Crypto communities pre-corona pandemic have been confined to Twitter and Telegram group chats. During the pandemic we have seen interest in crypto soar, taking mainstream media by the horns. Whether it be the famous Twitter hack where the hacker gained access to high-profile accounts requesting Bitcoin or the TikTok userbase cheering on Dogecoin. Although some instances of news are not positive, it is definitely a healthy scenario for cryptocurrencies and digital money.
Various factors come into play for this change we are all witnessing. First, the government is currently weakening fiat systems, take the USA as an example. The FED is printing more and more physical money, which in return is creating inflation for the US Dollar. Second, large financial institutions are welcoming digital currencies more and more, especially technology tied to crypto, blockchain. Lastly, as most of us are in the comfort of our homes, discrepancy in the market growth is evident, and unemployment rate climbing.
DeFi
Decentralized finance is by far the biggest hype in finance, taking traditional components and making them into transparent and trustless protocols via tokens and smart contracts. At the end of last year the DeFi market cap was around $700 million. Just as of recently, this number has increased to above $3.6 billion worth of locked digital assets.
Simplicity meets complex: accessibility to a borderless financial service — trading, insurance, loans, savings accounts, and more. These platforms offer these services are referred to as “dApps” running on the blockchain and eliminating a need for any central authority as in traditional finance. Leaving no room for failure; instead, having identical records kept across thousands of computers via the peer to peer network.
Case Studies
We are still in the early stage of DeFi, however, there are many examples showcasing its potential. DeFi has unclocked opportunities such as P2P lending platforms, banking services, alternative savings, decentralized exchanges, and more.
Why has the mainstream public not fully adapted this decentralized system? Having secure and faster transactions are not the only variables, price volatility is an issue still. Enter stablecoins — digital coins that are linked and backed by real-world currencies, such as USDC (backed by USD) or Dai (stabilized against the value of USD). These coins have grown steadily alongside the DeFi ecosystem, experiencing records transaction volumes of around $90 billion in the first quarter of 2020. Stablecoins combine the security and transparency of a digital asset with the stability of a traditional currency.
Peer-to-peer lending, staking and borrowing platforms are also emerging. A protocol called “Compound” establishes markets with algorithmic set interest rates. “Aave” an Ethereum based platform, showing advantages such as the ability to use digital assets with no credit checks, instant settlement of funds and as collateral. These systems have a greater appeal in contract to existing credit institutions.
Stablecoins will continue to grow, driving mainstream adoption and changing the way we transact forever. Countries that experience hyperinflation of their national currency will most likely be early adopters, with the amount of global money supply increasing represented by stablecoins.
Thank Bitcoin
Whether or not you’ve heard of Bitcoin, it’s a word and a concept that is not going anywhere. Crypto is building credibility. If for no other reason than curiosity, investigate Bitcoin and digital assets and see what everyone is talking about. After all, crypto will keep going while we are locked in our homes — a big flag being held showing that Bitcoin is a big part of our future. Get your first Bitcoin!
