Decentralized finance is growing from strength to strength despite an overall bearish year for the majority of crypto assets. A small investment in DeFi could have yielded more than bitcoin over the past year as recent research has found out.
The Year of DeFi
If 2018 was the year of the ICO then 2019 was undoubtedly the year for decentralized finance. As Ethereum and its brethren failed to gain traction, smart contract based lending and borrowing markets proliferated.
The industry is still embryonic though. According to Binance Research the number of monthly users is tiny at just 40,000, 90% of which are using decentralized exchanges.
Year to date the total value in USD locked in DeFi has increased by almost 200% according to defipulse.com. It is currently around $660 million after hitting an all-time high of $710 million on Wednesday.
Ethereum still dominates the scene with new records constantly being broken. At the moment the amount of ETH locked in DeFi is at an all-time high of 3.1 million. This equates to around 2.85% of the total supply.
Crypto research firm Messari has been doing some calculations and concluded that a $400 investment in four major DeFi sectors at the start of 2019 would have yielded a return of $1,400, or around 250%.
How would your portfolio look if you invested $100 in four major DeFi sectors at the start of the year?
Well, your $400 would be worth almost $1,400 pic.twitter.com/qFB58tIWoU
— Jack Purdy (@jpurd17) January 9, 2020
The research revealed that asset management was the best performing sector followed by prediction markets, lending, and finally decentralized exchanges.
DAI Savings Rate Increased
MakerDAO, which commands 56% of the total market has been out and about promoting DeFi to the masses. The Foundation was seen at this year’s CES tech show in Las Vegas representing Ethereum’s favourite stablecoin, Dai.
The protocol’s governance-token holders voted to raise the DAI Savings Rate (DSR) to 6% this week, up from the previous 4%.
MakerDAO introduced the DSR in November whereby holders can stake their DAI to earn a cut of the ‘stability fee’ that borrowers pay. This yields a much higher return than any fiat savings account in traditional banks which are currently dropping interest rates into negative territory.
Head of Business Development at the MakerDAO Foundation, Gregory DiPrisco, commented;
We just haven’t seen these kinds of returns on U.S.-dollar-based deposits in this decade
Ethereum meanwhile, is slowly slinking back to its lows around $135 following the bitcoin correction. The bearish momentum for Ethereum is likely to continue until bitcoin finally turns bullish once again.
Earlier this week Bitcoinist reported that DeFi markets could easily reach $1 billion when Ethereum prices finally recover.
Will DeFi markets hit a billion dollars in 2020? Add your thoughts below.
Images via Shutterstock, Twitter @jpurd17