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Top 5 DeFi Trends To Keep An Eye On In 2021

Top 5 DeFi Trends To Keep An Eye On In 2021

As a matter of fact, technological advancements are taking us towards an unpredictable future of social upheaval. Especially the pandemic year provides a wide range of opportunities to come up with innovative tech solutions. New tech has fallen into certain categories. Modern generation is prone to digital currencies such as ripple’s XRP, bitcoin, ethereum, stablecoin. 2020 was indeed the year of decentralized finance (DeFi), especially for the blockchain sector. 

Blockchain caught the bug of DeFi while the rest of the globe was gripping on pandemic fear. Crypto enthusiasts were furious about “FOMO-ing” on mining liquidity, borrowing stablecoins, and lending protocols. For short, DeFi dominated the conversation during the greatest part of the year and the prominent emergence was observed in non-traditional financial institutions during COVID-19. Total Volume Locked (TVL) was gathering momentum at a breakneck pace in February and passed the figure of $1 billion. This figure represents the dollar value of assets closed in DeFi treaties and ended the financial year above $13 billion. 

Some biggest trends of 2020 estimated what trends might prove to be influential for blockchain in 2021. Let’s have a deep insight into some most evolving trends in the near future. 

Liquidity Mining

Undoubtedly liquid mining, also known as yield farming, was the biggest craze evolving at a rapid pace to grip blockchain in 2020. This incentive scheme motivates crypto asset holders to lock their tokens in the decentralized network. This provides necessary liquidity and bootstraps the protocol in an unexpected way.  

Recently Compound launched its’ new COMP governance token. The prices and rewards of token rose in parallel to each other. Borrowers and lenders on Compound are permitted for the daily distribution of COMP tokens. Compound created a token economic model to reward lenders in the best possible way from borrowing.  

The unexpected and rapid momentum and popularity in yield farming seem as if a bubble is rapidly forming.  2021 expects to be a more revolutionary year with the generation of more automated yield farmers such as Yfarmer, yearn. finance. Both attempts exemplify the market and make it effortless for entry-level players to play a part. 

Advent of DEXs

According to the recent report of Kraken intelligence, 2020 was the year of bitcoin and prominent expansion was observed in the crypto asset market. They also claim that 2020 was the year of bull and set a remarkable standard for these digital assets to evolve at an astonishing momentum. Another wave of acquisition is expected as we enter 2021. 

It is said especially for DeFi that 96 percent of all locked ETH are in lending protocols or decentralized exchanges (DEXs). While comparing DEXs and lending protocols, it is concluded that DEXs possess less than half of the locked ETH in comparison to lending protocols. Its near +2,800% increase towers over the +60% rise in ethereum locked in lending protocols. It is also concluded that in the DeFi space, DEX will control the lion’s share soon of the TVL (ETH).  

Tokenization and Interoperability

Generally, doing stuff in DeFi comes with hefty charges. Keeping in view evolving popularity in DeFi sectors, the ethereum blockchain has been integrated with hefty charges.  The network effect of ethereum is one of the major reasons why DeFi applications have not been brisk enough to rewrite their smart commitments in new protocols. This is the reason why emerging crypto assets such as filcoin and bitcoin are tokenized on ethereum. 

It is predicted by ConsenSys that researchers are still working on different blockchains. Projects might consider heading towards other protocols ahead of Ethereum 2.0. The unexpected and rapid momentum of Etherum will move towards Layer 2 protocols, already coherent with Ethereum. 

Ethereum Has a Bright Future Ahead

Whenever decentralized finance comes under discussion, ethereum is always part of the conversation. Ethereum supports the DeFi in the best way possible in 2020 and the same trend is expected in 2021. The concept that DeFi is for strains credulity for everyone when simply circulating tokens around costs anywhere from $5 to over $30. 

Cross-chain technology is among the most evolving stories of 2021 because it allows assets from one blockchain to be represented on another. Matric is one of the projects that play a crucial role to evenly distribute the burden of the DeFi sector evenly across many blockchains. Matric is working on a sidechain for ethereum, while others are more prone to wide-ranging solutions. 

Stablecoins Passed Another Milestone

Another sector where DeFi will emerge with rapid momentum is the stablecoin market. $20 billion of the stablecoin was added over the course of a year and the supply of stablecoin moved beyond $26 billion. Tether USDT is the most prominent player with almost 79% of market dominance. With Circle USDC being one of the other major figures, the U.S dollar still reigns supreme in the stablecoin market. It is predicted that fat-pegged stablecoins might begin to eat the market share as the sector matures and with the emergence of government stimulus packages. 


Undoubtedly, 2020 proved to be the best year for decentralized finance because of the advancements in blockchain security. DeFi ensures its presence by expanding its blockchain community. 2021 can prove to be a greater year considering the above-described trends for the nascent sector. The price of the bitcoin surge passed the figure of $23,000. There exist numerous reasons for crypto and DeFi enthusiasts to stay ahead of the unknown with a sense of optimism and excitement.

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