Decentralized finance or DeFi is bringing a shift to traditional financial institutions, potentially may overtake the centralized exchanges. The DeFi projects are growing rapidly, providing token holders an opportunity to receive a higher rate of return than any conventional investments. Since the beginning of July, deposits by cryptocurrency enthusiasts into DeFi projects have swelled to more than $10 billion from $2 billion. Most recently Ethereum is on its way of transacting $1 trillion in a time span of one year.
Ethereum to handle $1 trillion in a year
Adding to the list very recently, DeFi projects boosted Ethereum too. Ethereum is all set to become the first blockchain to handle $1 trillion in a year. According to crypto market data aggregator, Ethereum has eclipsed Bitcoin in terms of an efficient platform for payments and on-chain transactions. This means that the Ethereum network is processing more than double the transaction volume of Bitcoin. Thanks to DeFi projects, MetaMask, the Ethereum browser wallet developed by ConsenSys, has surpassed one million monthly active users for the first time this month.
DeFi boom benefited Ethereum
The DeFi boom in the third quarter this year benefited Ethereum by making it the choice platform for many crypto users processing more than twice the daily transaction volume of Bitcoin (BTC). The rise of stablecoins such as Tether (USDT) and USDC also contributed to the cause. Majority of USDT transactions are now taking place on Ethereum and yield farming-driven demand pushing supply growth of more than 600% for MakerDAO’s DAI stablecoin.
Uniswap’s contribution to ETH rise
With the spike in transaction volume, it is expected that the Ethereum chain will be the first public blockchain to process $1 trillion worth of transactions in a calendar year. One of another leading reasons for this is Ethereum’s boom in on-chain liquidity. Uniswap has recently become the first decentralized finance (DeFi) protocol to cross $2 billion in total value locked (TVL). Uniswap and Curve did more than $20 billion in combined volume for September. DEXs now comprise 13.6% of total volumes from all exchanges both centralized and decentralized.
Uniswap is a fully decentralized protocol for automated liquidity provision on Ethereum. In less than two years since its launch it has become among the leading trading platforms on DeFi. Investors are jumping to Uniswap because it is the preferred platform for yield farming. Yield farming is a practice where a DeFi project creates tokens to reward users who provide liquidity, through either borrowing and lending or token exchange. DeFi project creates tokens to reward users who provide liquidity, through either borrowing and lending or token exchange.
According to a leading crypto market data aggregator, the 30-day rolling daily average for Ethereum transaction volume is currently $7 billion, with Bitcoin processing less than $3 billion.
Other DeFi projects
The open-source and non-custodial lending protocol, Aave’s native cryptocurrency- LEND has been seeing massive gains this year, reaching a new all-time high of $0.862 in August. The LEND cryptocurrency offers holders several advantages. For instance, LEND borrowers don’t get charged a fee if they take out loans denominated in the token. Also, borrowers who use LEND as collateral get a discount on fees.
yearn.finance (YFI) is a decentralized ecosystem that utilize lending services such as , Compound, Dydx, and Fulcrum to optimize token lending. Recently YFI founder Andre Cronje disclosed his latest experiment, a network called the Keep3r Network, whose native token is KPR. Borrowers and lenders can pay out KPR by providing KPR-ETH liquidity on Uniswap.
In 2019, daily transactions registered on the Ethereum (ETH) network exceeded one million for the first time since May 2018 as reported by leading Ethereum block explorer Etherscan. The rise in Ethereum’s transaction activity over the past few months, is especially due to the rise of stablecoins such as Tether as well as the DeFi boom. Such an achievement is an indication that the people are seeking an alternative investment and banking solutions as seen by PayPal also. The rise in Ethereum indicates the fact that more funds are being locked in DeFi than in traditional markets.
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