DeFi can be 100 times larger than today in 5 years

Decentralized finance (DeFi) is a natural product made possible by blockchain technology and has the right infrastructure ready to push the technology to a wider playing field. The space has grown by leaps and bounds since the Ethereum network went live in July 2015, with Ethereum network transactions growing from 33x to 1.2 million per day today, and blockchain transactions would exceed millions. per day if other chains are included.

Most of these transactions originated from DeFi services like Uniswap, which facilitates more than $ 1 billion a day, as well as loan and loan protocols like Aave, Compound, and BondAppetit, with a market size of tens of billions. . While these are large numbers by any standard, it is only a Trillion Dollar Traditional Finance Industry (TradFi) decimal point.

DeFi is only scratching the surface of TradFi services

The traditional financial system involves allowing the exchange of goods and services, including the stock market, the debt market, the derivatives market, the commodity market, payment, etc. This is facilitated by service providers: banks, insurance companies, stock exchanges, financial intermediaries, custodians, etc. - who charge billions of dollars in fees for services rendered.

DeFi's core services currently include lending, lending, decentralized trading, and performance aggregation, a relatively short list compared to the wide-ranging financial services offered on TradFi. This will not remain the status quo as DeFi developers are actively exploring and building more services for the ecosystem. Protocols that find the right product / market will see explosive growth, for example, the recent rise of dYdX.

The Trillion Dollar TradFi Market Is Ready For Disruption

Consumer banking. Global Retail Banking Revenues are Estimate at $ 2.3 trillion in multiple consumer finance products, including loans / loans, mortgage products, payments, etc. Specifically, consumer payments and transactions generate annual revenues of more than $ 500 billion for banks globally and could be leveraged with a frictionless user interface, a global stable currency, and broad acceptance points: the ambition of Diem from Facebook before regulatory rollback.

Capital market. The global equity market capitalization is Estimate at over $ 100 trillion, compared to just over $ 243 billion of total locked value (TVL) in decentralized finance. Security tokens are an inevitable trend that regulators will eventually need to approve and build the regulatory framework, and centralized and decentralized exchanges that adhere to the know-your-customer (KYC) requirement can take advantage of this trillion-dollar stock market. in TradFi.

Sure. The global insurance industry is another Trillion dollar TradFi industry that can be perfected with smart contract technology. About a third of the global insurance premium is allocated to commission and administrative costs, essentially representing a lack of benefit to the consumer. Smart contracts enable cheap, fast and accurate implementation of insurance processes, from underwriting to claims, and will be a lucrative source of revenue for the DeFi industry.

DeFi Addressable Market Size

Transaction volume. The Ethereum network processes more than 1.3 million transactions every day in 2021, spanning remittances, transactions, loans, loans, and various other types of transactions. This is a small number like compared to more than 1 billion daily credit card transactions worldwide, and about 5.5 billion daily Commerce volume on NASDAQ. Capturing 1% of credit card transactions on the Ethereum chain is at least 8 times its current volume.

Income by protocol. Annualized protocol revenue across all DeFi protocols is estimated at $ 5 billion. This, again, is a fraction of the $ 2.3 trillion of global retail banking revenue; $ 2 trillion of global cross-border payment revenue and $ 35 billion of global stock exchange revenue. The TradFi industry is so lucrative that gaining a 1% market share means increasing DeFi's revenue tenfold.

Cryptocurrency Crackdown Accelerates DeFi Trend. Although countries like China continues to crack down on cryptocurrencies, it will only speed up the use of DeFi. Active Ethereum wallet and MetaMask browser extension users have 10x-ed for 10 million in August 2021. While this is a seemingly high number, it represents only a 5% penetration rate among the 221 million global crypto users. This shows that general crypto users, who are used to frictionless centralized services like Robinhood, are a huge untapped market for DeFi and can be captured as UI / UX is improved.

Related: Cryptocurrency ban in China: buy the sauce or cause for concern?

DeFi is only three years old with services that became common to the crypto community in the DeFi summer of 2021. Lending platforms, such as Compound and Aave, along with decentralized exchanges such as Uniswap and Curve, consolidated their positions as leading protocols in the market with the advantage of being the first to move. These were not easy. Uniswap founder Hayden Adams wrote an article detailing your journey towards the launch of Uniswap V1 - it's the culmination of faith, friendship, support, and hard work during the crypto winter. The DeFi builder community has grown stronger in this new cycle with more programmers from both traditional startups and big tech joining the blockchain and DeFi scene, and this can only mean we have more resources than ever to grow. space and technology.

On February 4, 2004, a bedroom project was born and grew into a $ 1 billion company with 3 billion users in 2021; it's called Facebook, or Goal after rebranding. DeFi is just getting started, and with resources and talent flowing into space now, growing 100x in the next 5 years is not a dream, it is inevitable.

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