DeFi is still evolving and attracting investors with its rising capitalization. Like moths to a flame, both institutional and private investors are flocking to the new market segment, eager to bite some profits off before the bubble deflates and the razzle-dazzle of marketing and hype loses its luster. The innovative factor is even entirely missing from DeFi – it is the same crypto craze wrapped in a more practical application for the masses, leaving technology overboard.i Sy
It has often been said that a weapons system is never as terrifying as its marketing campaign. The same can be said of modern cryptocurrencies riding on the crest of DeFi, which is using the same technological blockchain basis that had washed ashore the likes of Bitcoin, Ethereum, Ripple and the rest.
“This concept that we call “decentralized finance” is not equal in itself to the one that most of the projects preach. Decentralization and the associated financial approach have fundamentally been achieved by the creation of Bitcoin and Ethereum. The real question is what will these new projects add to the fundamental, technical developments that many of the worthiest projects have been already possessing for years? How much is marketing, and how much are actual facts?” as stated by Norbert Goffa, Co-founder and Executive Manager of ILCOIN Blockchain Project.
The fact of the matter is that there is virtually no new technological development taking place to create an intrinsic base for not even the functioning, but for the existence of DeFi as a system. Just like currencies that have to have gold or some other commodity backing them up, cryptocurrencies rely on their underlying technologies. DeFi has no innovation behind it, not even any revolutionary breakthroughs in Atomic Swaps or any other system that would add value to it.
Pure speculation and profiteering are the basis of the DeFi system, which is promising little more than alternative passive income generation that can be provided by banks once again when the global economy recovers. DeFi is feeding off the economic crisis like an opportunistic investor, and that is creating risks for its very existence and the investments of those who have rushed after it.
“We can currently see that the so-called DeFi projects have started to follow the same path. That is, with the absence of tangible results, they have been trying to maximize profits via exchange trading by building on tempting ideas. Obviously, there could be some positive effects of this ongoing madness, but the negative ones will also be unavoidable; the consequences of which would be quite difficult to predict precisely, but one might have an idea regarding the outcome,” Norbert says.
Madness it may be, but the technology, whichever there is, can still be used and the margin of safety it has can be leveraged for quite some time still, allowing more advanced, more conscious projects to invest in research and development, and not the marketing department. It can be safely assumed that large corporations like Microsoft, IBM, Amazon and the rest are to be the spearheads of blockchain development, once again underscoring the fact that centralization and oligopolization are the norms of free market systems.
“All in all, we can conclude that the DeFi projects/tokens that we know today are much more marketing products with the goal of exchange trading than blockchain solutions possessing technological innovations with revolutionary ideas,” as Norbert concludes.