Why is 2020 a Year of Defi? | Defi Tokens in 2020 Trending

  • 2009 was the year of Bitcoin’s existence
  • Litecoin arrived in 2011
  • 2013 was the year of Ripple
  • 2015 came with an Ethereum narrative
  • 2017 was the year ICO (Initial Coin Offering).
  • 2018 was the year of stablecoin
  • IEO spiked in 2019
  • Defi – Here I come, 2020

Although, 2019 showed a higher search for decentralized finance (Defi), yet the search has not been reduced in 2020. In fact, 2020 turned out as the year of Defi.

What is DeFi?

What exactly is this ‘DeFi’ we keep hearing about? Two words: Decentralized Finance. It is an acronym for decentralized finance. It is a change of pattern from closed finance to a more open finance system built on open systems that are programmable, quickly composed, and interoperable.

To understand why 2020 is all about crypto, you need to understand the revolution of DeFi. It was created to replace go-betweens with codes and therefore maximizes financial services while minimizing charges. Go-between in this context means that DeFi connects the codes between systems, thereby making it easy for investors to earn while paying less for services. It was developed on the Ethereum network and continuously shows the features of smart contracts.

You may also want to understand – Decentralized Finance (Defi) Concept in the Layman’s Terms

Why is 2020 a Year of Defi?

DeFi Assets are Achieving New High Records

DeFi continues to gain ground in the investment industry and remains a top trend in 2020. This is because even though top cryptocurrencies like Bitcoin and Ethereum have experienced low volatility lately, DeFi assets are achieving new high records due to the attention it is getting from investors who love it. After all, the contract codes are impossible to manipulate or terminate by anyone. 

Total Funds Locked in Defi Hitting New Highs

Mid-range assets that are based on Ethereum like Yam, chainlink, melon, cream finance and some more are sharing the spotlight due to their high spikes in prices. Funds locked in were recorded to have grown from a billion dollars to over six billion in just six weeks. With records like this, it is easy to see why DeFi isn’t going anywhere soon.

2020 Witnesses Major Boom in DeFi projects.

Unlike the previous years where we have heard one or two projects come out of the space, 2020 has seen a major boom in DeFi projects. Ranging from YAM to YFI and interestingly the new Spaghetti Money that was launched not long ago, we have seen massive price jumps. 

You may want to read – Yearn Finance: A 3 Minutes Guide to YFI Token

DeFi Projects Has Had Swell Time while Volatility Took Charge

One major key factor that made 2020 the year of DeFi is the fact that around the early parts of this year, volatility took charge of the entire crypto market. While the crypto market was suffering from massive price increase and decline, DeFi projects were having a swell time due to their upward jump in price.

Pool of Investors in Defi Ecosystem

Another major factor has been the pool of investors that have swarmed over to the DeFi sector. As a result of the success enjoyed by the projects in the DeFi space, it has triggered the fear of missing out among investors and they have pitched their tent in the DeFi space. With the DeFi boom not going away anytime soon, investors would likely continue to enter the space which means more success for DeFi.

Challenges facing DeFi?

The crypto sphere is continually expanding and working towards an open financial system; the Ethereum network shows this with the creation of an on-chain economy system that incorporates the present finance systems. The open financial concept isn’t focused on creating a new system but rather, trying to democratize the current economic system and make it much more equitable with transparent data.

DeFi, however, has some challenges like the fact that since it was developed on the Ethereum network, only Ethereum based decentralized finance is supported. Therefore, a global DeFi is yet to be achieved, but this can efficiently be dealt with. DeFi has proven unstoppable and is on its way to transforming the current finance system.

DeFi, as a new movement in the crypto industry, has garnered many fans while there is still some skeptic who doesn’t believe it will enhance crypto adoption. However,  doesn’t seem to be going anywhere and keeps overcoming any challenges it faces. It is an unstoppable innovation that will revolutionize the financial system in the coming years.

Which Defi token is your favorite? Do you think 2020 is a Year of Defi? Let’s discuss over Twitter. Tag us @CoinpediaNews

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