DeFi 2.0 poised to defy expectations this summer

[LazY]

Before the summer of 2020, DeFi was hardly on anyone’s radar. This was understandable given its under-one-billion-dollar TVL at the time, which represents a market cap that even a meme coin could surpass in a matter of months. Since then, from May 2020 to May 2021, an entirely new financial infrastructure has been created, boasting spectacular growth at over 7,250%.

However, even today, with DeFi at $68 billion TVL and an estimated 2 million users (unique addresses), this is a drop in the ocean compared to the all-encompassing centralized finance as we know it. In other words, decentralized finance using blockchain and smart contracts to remove the corruption and cost of mediators represents merely 14% market cap of a single bank like JP Morgan.

Nonetheless, it would be foolish to gauge DeFi in such crude terms as how much money it currently has locked in. Even JP Morgan would disagree with this approach. Just recently, the world’s largest bank made it clear in no uncertain terms that it views DeFi as its biggest competitor:

"ETH should outperform BTC over the long run" – JP Morgan pic.twitter.com/FCsFZ05i5S

— Documenting Ethereum 🧾 (@DocumentEther) April 28, 2021

Ethereum is largely responsible for creating DeFi from scratch. While there are other blockchains that are capable of executing smart contracts, Ethereum gathered a critical mass of developers and dApps (smart contracts) over the years to get DeFi where it is today. No doubt, Ethereum hobbled itself severely with skyrocketing gas prices, allowing Binance Smart Chain to pilfer its traffic, but this too is a temporary obstacle soon to be crossed.

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