DeFi caught the world by storm during the bull run markets of 2021-2022. But after countless issues such as rug pulls, hacks and overall bad tokenomics people got pretty sick of it.

Just look at the market cap of DeFi since then and what a small push it had during the major rallies of bitcoin and Ethereum that have been happening.

It's pretty clear that the demand value for DeFi is pretty low and there's seriously huge trust issues with these platforms rightfully so. It does feel like the DeFi world is finally waking up to this and trying to come up with new solutions to fend off such things from happening.

One of the largest pushes was liquidity staking tokens of LST which I wrote in detail about here LSDfi evolution of LST

The Evolution

DeFi could very well be in a great position at the moment. With banks currently offering over 5% and bonds a little higher with extremely low risk investment in these areas are extremely heavy. This is currently why DeFi is not that looked after since the APRs for risk vs reward have come crashing down to lower levels then that of putting the money into a savings account in most cases.

DeFi was suppose to replace a bank which means you should be seeing at least APRs of 7% upwards of 12% as a rather steady and common practice but we are not.

That being said though banks are starting to signal for rate adjustments on the decline instead of the constant upper trend we have been seeing. If rates fell low enough it would start to make defi look attractive again as the primary reason people flooded DeFi was to collect some type of APR when banks were offering 0% or maybe 0.5% at the time.

However the negative pressures still on DeFi are going to be regulations of which everyone's viewpoint so far is, if it's decentralized then we don't have to worry about it it's fair game. The issue is I don't think we will ever get to anything being truly decentralized. There's domain name registration, hosting, code, people that worked on the project and of course ISPs which we have seen before simply outright block domains.

The next evolution of DeFi seems to primarily be focusing in some new areas and that's for institutions. Things like margin lending, insurances and credit

What's clear is DeFi is going to have a long way to go before it can become main stream adopted once again.

Niched DeFi

What I've been seeing happen more so now is the fact of niching out the defi systems. Before DeFi systems expanded to multi chain and multi token which made of a huge mess or regulations and security issues. It for sure helped out a few platforms but mainly the focus rolling forward now is to bring that down.

For example the hive blockchain and the game Splinterlands which is using their own token and connecting it to hive and a very select few others tokens creating a internal defi network in which is fueled by investors and players. These new type of DeFi is most likely what is going to start catching on in a big way. Instead of a single massive entity you now have localized solutions. But these localized solutions will still have tentacles that reach out further through these larger defi platforms such as Pancake Swap, Uniswap, Thorchain and a few others.

Posted Using InLeo Alpha