DeFi has quickly become the new buzzword in the crypto space. Yet, unlike ICOs or some of the other unsustainable practices we’ve seen in the past, DeFi is here to stay – and it’s gaining momentum fast. As a centralized cryptocurrency spot and derivatives exchange, people sometimes wonder if DeFi is a threat to OKEx or if the rise in DeFi-focused altcoins is a challenge for Bitcoin. In actual fact, we believe that the growth of DeFi can only be good for the space and all the players in it.
The Burgeoning DeFi Space
Earlier this year, DeFi passed an important milestone. The cumulative value of tokens locked in DeFi applications soared past $1 billion in Feb 2020. Like every other area, it faced some headwinds shortly after with the massive market sell-off, yet it was quick to recover its value. By the middle of June, that figure had recovered again. Less than one month later, it had ballooned to reach more than $2 billion. Today, there is more than $7 billion locked into DeFi protocols.
With this kind of growth, DeFi is an area that no cryptocurrency business (or indeed, traditional finance business) can or should ignore. It will mark the way forward for the next wave of crypto adoption and provide the industry with an important alternative to fiat-crypto exchanges to getting more fiat on-ramps.
DeFi will also allow the space to finally, really service every individual on the planet with the financial services they need to lead dignified lives and participate in their local economies. #FinanceAll.
OKEx Supports the Growth of DeFi
We believe that DeFi is not going to remove the need for centralized exchanges nor will cryptocurrency erase the traditional financial system. All this can co-exist to make the world a better, fairer place in which traditional institutions are more accountable and people are better educated about their personal wealth – and have more options as to how they preserve and accumulate it.
We are also proud to diversify our business model from our core spot and derivatives exchange to launching new products to cater to the demand in the DeFi area. To that end, OKEx has released a C2C trading feature allowing consumers to trade directly between themselves. We also launched OKChain, which is the most decentralized public chain out of all the cryptocurrency exchanges, and we are proud to be one of the first validators on Ethereum’s Topaz testnet, one of the testnets for ETH 2.0, with OKEx Pool.
The move to ETH 2.0 will undoubtedly propel DeFi to even higher heights, and the achievements of other protocols such as Maker DAO, Compound, and Aave, are also gaining enormous traction, which is why we have listed their DeFi tokens for trading on our exchange.
OKEx recognizes the rise in demand for DeFi tokens and has been quick to support the industry and provide our traders with the opportunity to invest in high-quality projects. So far we have a total of 19 DeFi tokens listed, almost all of them over the last few weeks as more and more promising projects come out at a rapid pace.
DeFi Is Good for Bitcoin
Of course, with so much expectation (and perhaps just a little too much hype) surrounding DeFi right now, there’s always the possibility of a price correction in the near future. In fact, looking at the charts, with the exception of Aave’s LEND token which is up 45% in the last seven days, many of the major DeFi tokens like LINK are experiencing some pullback, down by 10% this week.
Just like the ICO mania, DeFi is making a lot of noise and, when that happens, prices typically become inflated, which could lead to a bursting bubble.
There are still many obstacles in DeFi’s path including scalability, regulation, and interoperability (among others). The technology is still learning to walk while we’re hellbent on making it run. A bursting bubble or a stumbling block here and there may be inevitable in the short term, yet that won’t hinder the long-term progress of the industry. And it could actually be good for Bitcoin.
Since the majority of altcoins (including DeFi tokens) trade against ETH or BTC and not the U.S. dollar, when traders want to cash out, they need to acquire one of these cryptocurrencies first. If DeFi undergoes a sharp correction, that will mean more liquidity and strong capital inflows for Bitcoin. And if DeFi tokens begin to make real strides again, its growth will still be good for BTC… building out the entire crypto ecosystem can only be a good thing for everyone involved in it.
About the Author: Jay Hao is the CEO and Chief Customer Service Officer at OKEx.
Image by Arek Socha from Pixabay