The Decentralized Finance (DeFi) market could reach a $1 trillion market capitalization in the coming year. This could happen thanks to new companies and institutions investing in this fast-growing market. In the future, several smart-contract-based products could replace many of the current centralized services.
Decentralized Finance Could Reach a $1 Trillion Market Valuation
DeFi financial solutions have been expanding all over the world in recent years. The growth of blockchain technology has been very important for the market to reach its current status. But the best seems that is yet to come.
According to data shared by the blockchain analytics firm Chainalysis, DeFi has been adopted by larger companies and investors. They also explain that transactions of over $10 million represented close to 60% of DeFi transactions during the second quarter of this year.
With this in mind, almost $180 billion are now locked on different DeFi platforms. This shows how far the industry has moved in recent years but it also shows that it has a large potential to continue growing even further.
One of the things that we should now look at is at large companies investing in DeFi solutions. Banks and other financial institutions could start using DeFi solutions rather than centralized options.
According to Jonathan Knegtel, it would just take one or two banks to place a small portion of their funds in DeFi for other institutions to follow. Many of these firms would now like to be left behind. At the moment, the top 55 banks in the world hold close to $94 trillion in assets. A 1% allocation to the DeFi market could represent $0.94 trillion of liquidity entering the DeFi ecosystem.
On that matter, Knegtel said:
“If one or two major banks find a way to benefit from DeFi even with a small 1% injection, they will reveal a path that many, many more will want to follow so as to not be left behind.”
At the moment, some of the largest DeFi protocols in the market include Uniswap (UNI), PancakeSwap (CAKE), Sushiswap (SUSHI) and many others. Ethereum (ETH) has been the selected protocol to launch more of the DeFi solutions but the Binance Smart Chain has also attracted a larger number of investors since September 2020.
In the coming months, new networks could be used to run DeFi applications and solutions. It is just a matter of time to see this market expand even further,