Decentralized Finance (DeFi) is no-brainer the crypto ‘buzzword’ of 2020, this space has experienced tremendous growth within the past few months. Currently, its total locked value (TVL) stands at $8.35 billion, with the number of listed DeFi tokens increasing by the day. While the rise has been pretty fast, its long-term sustainability is in question when it comes to the underlying tokenomics. In fact, recent weeks have seen malicious actors capitalize on such shortcomings to execute ‘Rug Pull’ exit scams.
The trend has since attracted pessimistic sentiments about the future of DeFi; one particular skeptic is Messari’s crypto data site founder, Ryan Selkis. Often known for his right predictions on the crypto market, Selkis recently said that the ‘anticipated’ DeFi bubble will pop sooner than expected,
“DeFi is just one big pool of capital sloshing around a small group of insiders and mercenaries who will soon run out of victims to fleece.”
That said, the DeFi hype is now at risk of being overtaken by fundamental decentralized projects with a CrossFi value proposition. These are basically blockchain-built innovations whose focus is integrating the liquid traditional finance markets with a decentralized architecture. Consequently, CrossFi projects are gradually positioning themselves as the main value drivers towards a sustainable shift to Web 3.0 solutions.
CrossFi; A Sustainable Future for Decentralized Finance
Decentralized Finance proposes quite a significant value to the world’s unbanked population; they will now be able to access all sorts of financial products without the hustle of getting a bank account. CrossFi innovations further enhance this value through a combination of the best blockchain and traditional finance features. One such initiative is the Mineplex banking ecosystem which offers a mobile cryptobank based on blockchain tech and smart contract infrastructure.
Unlike DeFi projects, the Mineplex financial ecosystem is more sustainable in terms of volatility as well as integration with traditional finance products. Some of the financial services offered within this mobile cryptobank include payment facilities through its banking debit card; users can pay in both crypto or fiat depending on their preference. Mineplex clients can also convert their fiat to crypto and vice versa without leaving this CrossFi interface. Other advanced financial services offered within this ecosystem include loan refinancing from traditional banks and saving facilities for both fiat and cryptocurrencies.
To function effectively, CrossFi projects like Mineplex are decentralized and thus built on blockchain ecosystems. This particular project bases its fundamental architecture on the Tezos blockchain, making it hard for malicious actors to change records, unless in the event of a hard fork. In addition to this, Mineplex leverages smart contracts to automate its cryptobank services. This means that they only take a few minutes instead of what would have been a 3-5 business day delivery in centralized global remittance networks. Like most crypto innovations, the Mineplex ecosystem is powered by its native token ‘MINE’ which acts as the unit of computing power.
CeFi Crypto Exchanges Still Valuable
With all the disruption happening, some crypto enthusiasts have been quick to dismiss the future of centralized crypto exchanges. Just a few weeks ago, Uniswap which is now the leading decentralized exchange in market volumes passed the activity on top crypto exchanges; it currently has over 8,000 liquidity pools with the last 24-hour average volume currently at $353 million.
However, this is not to say that it is time for Virtual Asset Service Providers (VASPs) in this niche to ship out. As it stands, the odds might actually favor some of these platforms, especially those with cutting edge products like OKEx which offers both spot and derivative crypto trading facilities. Such products are very young in the crypto market and therefore more likely to be natured in centralized exchanges as opposed to DeFi where the rate of experiment is still very high.
Crypto Exchanges also enjoy a first-mover advantage in user acquisition, being the most popular on-ramping avenues in crypto’s existence. This leading market position gives them a leeway in setting favorable transaction fees and huge discounts on the same; Nominex which is one of the leading crypto exchanges gives up to 50% trading discounts for users that leverage the platform’s native token ‘NMX’ in transactions. Such incentives have come a long way in surviving the DeFi wave and could be sustainable if Ethereum does not sort its high network fees (gwei).
The DeFi hype will certainly change the dynamics of traditional finance, regardless of whether its current supporting infrastructure survives the times. This is because of the potential to on board anyone from all corners of the world into a decentralized financial ecosystem which means they get to interact with featured products real-time. Basically, decentralization will eliminate the need for lengthy KYC processes to access financial products while increasing the versatility of available portfolios.
While the future of decentralized finance is promising, its existence under the ‘DeFi hype’ is now at a threat. Finding a new home in CrossFi is one of the ways innovators are now looking to circumvent the reputational risk associated with projects in this line. This approach appears to actually have a solid value proposition in the integration of traditional finance with blockchain. Going forward, it is likely that CrossFi will eventually overcome the DeFi hype as decentralized finance is advanced into more sustainable infrastructure designs.