More and more people are becoming interested in DeFi, the catchy abbreviation for “decentralised finance,” an area of the cryptocurrency market. In short, DeFi relates to the financial services industry’s use of smart contracts – contracts that can be described as being automatically enforceable but that don’t require the need for banks and legal beagles. Instead, Defi uses blockchain technology.
Over the past few months, investments, in general, have been significantly toned down by the COVID-19 pandemic and the disastrous impact it has had on industry and commerce. But the Defi market has bucked the trend.
Since September 2017, the total value of DeFi contracts has risen from £1.6 million ($2.1 million) to a staggering £5.3 billion ($6.9 billion) – yes, billion. In fact, from August 2020 to the time of writing, it has climbed £2.10 ($2.9 billion).
What Happened to DeFi in 2020
The Defi industry boomed in 2020. The Coronavirus outbreak was significantly, but not solely responsible. It came about as investors made maximum use of decentralised exchanges, investing in various ecosystems forecasted to pay high interest, and leveraging smart contracts to take out loans. The DeFi market, it seems, knows no bounds.
Given the situation with COVID-19 and the resulting decline in global stocks and shares values, many savvy investors both in the UK and USA turned to DeFi as an alternative way to invest and get lucrative returns.
Jumping on the Bandwagon
Blockchain technology and its new smart contracts, provide high levels of privacy and security meaning less chance for investors to be scammed, and with its low entry-level requirements, it poses an extremely attractive proposition. It comes as little surprise on reflection that the DeFi market boomed as it did, and forecasts maintain the trend is due to continue in 2021 as more and more investors become aware and jump on the bandwagon.
Here in the UK, more than 60% of investors say they are planning to buy bitcoin in 2021, and in the USA, according to a recent survey by Xangler, that number is said to be over 72%.
The continuance of the expansion trend this year does mean that the DeFi market has some work to do to prepare the groundwork for the expected influx of new investors. Some improvements are already underway. Take Ethereum as an example.
The Ethereum Upgrade
Ethereum is the most broadly used blockchain in the DeFi industry. It is where most DeFi applications reside, and it handles billions of Pounds worth of transactions every week. It is dubbed by many as the next internet, given its ability to decentralise financial services and unite communities around the world.
Within its range of dApps (decentralised applications), the leading ten are responsible for hosting around 1 million users per month and operate on a 24-hour basis handling a volume of trade above £25.4 billion.
An upgrade is underway – the Eth2 upgrade. It will not only facilitate increased security, but it will also make the system more scalable and able to handle larger volumes of activity.
The Argo Blockchain
The Argo Blockchain – the only cryptocurrency mining organisation to be listed on the London Stock Exchange, has become one of the most sought-after stocks. Argo is a crypto miner, which many Investment and trading platforms are citing as being one of their highest take-ups this year.
Investors who are keeping their powder dry on conventional equity markets are turning their attention to cryptocurrencies, and when they cannot procure them as asset themselves, they look for what they believe to be the next best thing, and that is the miners. That is where Argo, in particular, is scoring.
Boosting ISAs with DeFi Investments
Many investors are now considering DeFi as a way of boosting a UK investment ISA, using Bitcoin or Ethereum as the vehicle to do so. It is where more and more people see cryptocurrency miners as a viable solution.
The demand for crypto is being driven in part by large corporate and institutional investors exploring new asset strategies. Of course, the more they do so, and the more DeFi becomes entrenched in the investment conversation, the safer the private investor feels.