As someone who has been closely following the crypto space for several years now, I find the current state of decentralized finance (DeFi) particularly intriguing. The way real-world assets (RWAs) are being tokenized and integrated into the DeFi ecosystem is a significant trend that was predicted but seems to be accelerating at an unprecedented pace.
It may only be April, but it has already been a fairly eventful year for crypto.
I’ve observed that in the opening month of this year, the United Securities and Exchange Commission (SEC) reluctantly gave its approval for Bitcoin spot exchange-traded funds (ETFs). However, the latest Bitcoin halving event, marking the fourth time this cryptocurrency undergoes this process, has since taken center stage in the news.
I’ve observed Ethereum making a significant stride forward in its development roadmap. In March, they initiated the long-awaited Denver upgrade. This enhancement is geared towards strengthening Ethereum’s synergy with layer-2 blockchain solutions.
What, then, of decentralized finance (DeFi)?
In the last month of 2023, CryptoMoon sought insights from renowned professionals about the upcoming trends in Decentralized Finance (DeFi) for the year 2024. One such expert we interviewed was Kevin de Patoul, the CEO of crypto market maker Keyrock.
While observing the financial landscape at that moment, I noticed de Patoul emphasizing tokenized U.S. Treasuries (T-Bills) and the tokenization of other real-world assets (RWAs) as noteworthy trends on the rise. Amidst the market’s revival, I had the opportunity to speak with de Patoul through CryptoMoon, inquiring about his perspective on DeFi’s advancement:
“De Patoul confirmed the increasing trend of real-world assets moving onto the blockchain last year, with T-Bills being particularly popular. While growth has persisted, it’s been at a slower pace due to less appealing rates. The progression of this development is ongoing, but it’s a lengthy process.”
BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), introduced in March, is one trendy option mentioned by de Patoul. This fund represents the merging of tokenized real-world assets and stablecoins. BUIDL aims to maintain a steady value of $1 per token while granting daily accrued dividends to investor wallets at monthly intervals.
De Patoul also cited PV01, which issued its digital native bond as recently as April 8.
In observing De Patoul’s perspective, I note that the presented instances represent merely the initial stages of an extensive metamorphosis. Every asset, according to him, is destined for digitalization in this process. However, he emphasizes that this transformation will require considerable time before its full potential is achieved.
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“It’s not something that I would see happening in one year,” said de Patoul.
According to De Patoul’s perspective, “Crypto signifies a trailblazing concept for digital value representation.” The past fifteen years have validated this concept’s effectiveness, and the following fifteen years are expected to focus on expansion.
“Where are we going to be in 15 years — what will the world look like when all assets are on-chain?”
This question calls for uncommon persistence in an industry known for its short-term focus.
Exceeding expectations in DeFi
The prediction of asset tokenization as a trend was widespread, yet Eduard Jubany Tur, the founder of perpetual trading exchange ZKX, continues to encounter unexpected aspects in its implementation.
“For years, we discussed bringing crypto into the real world, but surprisingly, the real world has adopted crypto instead,” Tur shared with CryptoMoon.
“According to Tur, there’s an ongoing trend of Decentralized Autonomous Organizations (DAOs) or Referendum Wising Assemblies (RWAs) taking place. This development is significant because it’s occurring on-chain within the main networks. In contrast, for the past decade, the industry has primarily focused on creating permissioned blockchains and infrastructure tailored for institutions.”
In simpler terms, Tur states that institutions have come to understand that decentralized networks like Ethereum align with their risk tolerances. Consequently, they now choose to operate directly on these networks instead.
Observing Tur’s words, I can’t help but be impressed. This is truly a remarkable milestone for our industry, something we wouldn’t have anticipated even a few short years ago.
The evolution of DeFi
According to Danny Chong, the founder of Tranchess, a platform designed to boost asset returns, the forecasts from 2023 are coming true in the year 2024, particularly when it comes to RWAs (Risk Weighted Assets).
Just like Tur, I’ve noticed the merging of the cryptocurrency realm with the physical world and vice versa. Chong emphasized this point to CryptoMoon, sharing his perspective that Decentralized Finance (DeFi) is undergoing significant evolution.
“Crypto is now being invested in or being looked upon with interest by the financial giants, the likes of Fidelity, the likes of BlackRock, the banks and so on.”
I’ve noticed that for Chong, Bitcoin Exchange-Traded Funds (ETFs) represent yet another manifestation of the growing intersection between traditional finance and cryptocurrencies. However, it’s essential to acknowledge that this is far from being a standalone occurrence. The connection between these two domains is deepening with each passing day.
I’ve been observing the crypto world closely, and I must admit, I’m taken aback by the unexpected surge and acceleration of “centralized DeFi” as a trend. It’s a paradox, isn’t it? Decentralized Finance (DeFi) is all about removing intermediaries and relying on blockchain technology for trustless transactions. But here we have centralized versions of DeFi emerging. It’s an intriguing development in the ever-evolving landscape of this digital economy.
“Centralization in Decentralized Finance (DeFi) is gaining acceptance among people. Previously viewed as a drawback, it’s now recognized that some level of centralization could be beneficial. As a result, several DeFi protocols have emerged with built-in centralized components.” – Chong.
“Strict DeFi users have acknowledged that certain aspects of the ecosystem might not be detrimental after all. Ultimately, individuals in Decentralized Finance, similar to traditional finance, prioritize two key objectives: safeguarding their funds and earning profits.”
So, while the sector’s idealism may suffer, centralization will continue to gain traction in DeFi.
Good intentions never last
Tur points to another area where reality erodes idealism.
By December 2023, the cryptocurrency market had entered a prolonged downturn, often referred to as a “crypto winter.” However, as April draws to a close, there’s renewed optimism and bullish sentiment in the market. Tur posits that the bear cycle psychology is mirrored in the December 2023 industry predictions. In simpler terms, the crypto market was experiencing a significant downturn around December 2023, but as April nears its end, there’s a positive shift in attitude and expectations. Tur believes that this pessimistic mindset is evident in the industry forecasts from that time.
During every bear market, I’ve noticed a common pattern: people seem to believe that this is the time to atone for past mistakes, as if the market will magically cleanse us of any wrongdoing.
In the midst of a bear market, it’s commonly advised that this is an opportune moment for constructive actions. Tur, however, proposes a more optimistic perspective: it’s also a time for harboring good intentions and embracing the best aspects of the market. Yet, as human nature often dictates, those positive intentions can quickly fade when the bull market takes charge once again.
In the ever-changing market, according to Tur, we consistently find ourselves making mistakes and repeating past behaviors, but with renewed vigor each time.
“We’re back into what I call Ponzinomics, which is probably the law of gravity in crypto. How do you pile up and distribute incentives in a way that motivates users to come and use different protocols?”
The solution that the market has chosen this time is what Tur calls “recursive airdrops.”
According to Tur’s explanation, the concept of recursive airdrops involves utilizing various platforms, with each platform granting you points or possible qualification for airdrops offered by other third parties.
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In this fresh perspective, providing liquidity to a protocol could lead to various airdrop opportunities for you. However, determining eligibility for these airdrops isn’t consistently transparent or announced beforehand, turning the pursuit into an intricate game of informed speculation.
Just like choosing a successful pick among layer-2 solutions can be difficult, Tur warns us to brace for an abundance of new layer-2 projects akin to the Cambrian explosion in crypto. Historically, around 90% of such projects have either vanished or lost significance.
For both developers and airdrop enthusiasts, the buoyant optimism during a bull market fuels the desire to take risks, similar to gambling.
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2024-04-25 16:49