DeFi was one of the most interesting phenomena in the cryptocurrency market in this 2019; if in 2017 we had the explosion of the quotations, in 2018 the proliferation of stablecoins, 2019 was certainly the year of decentralized finance.
All this interest is explained by the fact that DeFi seems to be destined to keep a whole series of promises that, to date, individual coins, such as bitcoin itself, have not been able to respect; the ultimate goal of the DeFi community, in fact, is to succeed is to reproduce all the services and functions provided by banks and other entities in the financial world in a totally decentralized way, thus eliminating the need for intermediation.
In a sense, we could say that if bitcoin is the promise of a currency released by a central bank, DeFi is the promise of being able to have the same type of operation offered by a bank, but in a completely autonomous way, without the need for a intermediary.
This promise, however, prevents finding a clear definition of what decentralized finance is, for the simple reason that DeFi can be applied to a number of different sectors, from insurance to loan provision, from online identification and authentication processes, up to decentralized exchanges, consequently finding a common definition to describe what the different platforms are becomes practically impossible; when we talk about DeFi, in other words, we will find subjects that link this word to the platforms for providing loans with collateral collateral in bitcoin, others will immediately think of decentralized exchanges, still others of the possibility of earning a small income on cryptocurrency deposits.
Also from this we understand how young this sector is, precisely from the absence of univocal definitions that allow to discuss the topic without misunderstandings; despite the young age, however, the market for DeFi platforms has experienced enormous growth during this 2019. It is estimated, for example, that the amount of capital within the DeFi projects on the Ethereum network has more than tripled compared to 2018 ; just think that the market for DeFi platforms built on the ethereum blockchain in 2017 was worth just 30 million dollars while today its value is estimated at 610 million dollars.
It should be noted, however, that this growth also seems to have a counterproductive effect on the market itself; for example, one of the sectors in which greater liquidity has been concentrated is that of loans, used as an alternative to leveraged trading.
Since in cryptocurrency trading small investors are practically cut off from the possibility of investing using leverage what has happened has been that DeFi platforms have started to provide loans which are then used by traders to raise the stakes ; instead of using a 1:10 leverage, therefore, what many people are doing is borrowing the liquidity necessary to equate an investment made with a 1:10 leverage.
The problem is that the volume of loans disbursed is starting to be very high, while at the same time almost all altcoins have accumulated huge losses at the moment and the same bitcoin is, after the bull run at the beginning of the year, on the right path to return from where he left on December 2018; the risk is that many of these loans will not be repaid, sending millions of dollars in smoke and risking to cause significant damage to the ecosystem.
Despite all this, almost all the leading experts agree that the interest in DeFi platforms will continue to grow also in 2020, driven by the rise of decentralized exchanges and by the possibility for savers to obtain an income that, in some cases, may exceed 10% per annum on deposits; we can therefore expect that this market will continue to grow for the next year and, on the contrary, I would not exclude that precisely this growth could end up facilitating the recovery of the price of the main market currencies
