TI-DeFi Industry Research 2020 Annual Report

TI Research

The only boundary for the development of DeFi is your imagination.

Summary and Outlook

2020 is a year of extraordinary significance, and it can even be described as disasters and disasters. The COVID-19 has brought serious negative effects on the economy and life of the world.

The 3·12 Market Crash seemed to make people lose confidence, but soon as DeFi developed and ‘the summer’ arrived. 

Compoud's liquidity mining has ignited the enthusiasm of the market, and many high-yield mining projects emerged endlessly. But the high yield was obviously unsustainable, and at the end of August, “the summer” was almost over.

The market is always changing rapidly. SushiSwap copied Uniswap and issued its own token. Massive liquidity was attracted to Sushiswap. Uniswap regained its own market share through airdrop activities, and a large number of AMM DEX appeared to try to solve the problem of impermanent loss and slippage.

In addition to the spot trading DEX, lending projects broke out again. As the boss, AAVE’s TVL increased rapidly at the end of the year, and the price of $AAVE also broke new highs repeatedly.

The charm of DeFi lies in her permissionless, diversity, compatibility and composability.

As the infrastructure: DEX & lending is taking shape, the upper-level applications will also have the soil for development. 

The only boundary for the development of DeFi is your imagination.

We have seen a large number of aggregator-type projects exploded, and derivatives have gradually expanded to form a scale. Now you can hedge against risks on-chain without leaving the DeFi ecosystem.

As lending protocols with most TVL only allows floating interest rate, innovations were coming up since the second half of 2020 to provide borrowing and lending options at a fixed interest rate, or to enable earning fixed interest by working similar to a yield aggregator. Explorations were also seen in uncollateralized lending. Investment products have begun to become more diversified, not just high-yield and high-risk projects, but these protocols are all in an early stage with the TVL not comparable to “old” lending protocols.

Although the experiment for algorithm-based stablecoins started long before the “DeFi summer” in 2020, they did not draw as much community attention as in 2020 Q4-2021 Q1. These assets are widely perceived as “dangerous” with high price volatility in terms of a stablecoin, especially the ones that are totally free from any collateral and only issue one token.

We should still see every valuable attempt in the DeFi field with an open and excited attitude.

Layer-2 solutions gain increasing importance and are being integrated to more DeFi projects as the Ethereum network congestion is calling for higher efficiency. Other infrastructures including data services and tools also gained popularity as the network diversifying.

While Ethereum DeFi expanding, the construction of DeFi on other chains accelerated. With the natural advantage of user flow and capital, centralized exchanges were able to launch chains and attract projects in a short period of time. However, although their gas fee is much lower than Ethereum, the whole maturity of their ecosystem is far behind.

BSC and Polkadot are two of them that stand out. With support from Binance, BSC naturally attracts projects that want to be the “early birds”. Polkadot has lots of true believers and the ecosystem is gradually developing.

EIP-1559 is the proposal that can potentially solve the high gas fee problem and make it predictable. But it is a harm to miners to some degree and the increase of the gas limit is also a threat to network security. Nevertheless, it is still an excellent way to protect Ethereum users and HODLers. As Ether burned in the base fee, the price of $ETH might also 🚀🚀🚀

Table of Contents of DeFi report.

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