• Decentralized Finance (DeFi) still demonstrates greater potential than the traditional financial industry, despite recent setbacks, according to a new report from Hashkey Capital.
• DeFi protocols have shown “great resilience” to market volatility and have a higher scalability and autonomy than traditional financial services.
• However, the Total Value Locked (TVL) in DeFi protocols has dropped significantly through the year, from highs of around $180bn at the end of last year to $41bn currently.
The recent report from Hashkey Capital has revealed that the decentralized finance (DeFi) industry still demonstrates greater potential than the traditional financial industry, despite recent setbacks. This is due to the scalability and autonomy of DeFi solutions, which surpass that of traditional financial services many times over.
The report highlighted numerous advantages that DeFi protocols have over traditional finance. For example, the scalability of DeFi solutions is much greater than traditional financial services, as evidenced by smart contracts developed by single developers processing billions of dollars’ worth of transactions. Additionally, the decentralized and autonomous nature of DeFi applications means that they do not need to rely on labor to run, unlike traditional financial services. This makes DeFi protocols more resilient, as well as translating into a much higher net income per employee.
Black swan events, such as the Terra Luna collapse, have further demonstrated the strength of the DeFi sector. Despite the collapse affecting many centralized finance (CeFi) companies, the decentralized protocols emerged unscathed. This has further highlighted the resilience of the DeFi sector and its potential to outperform traditional finance.
However, the report also revealed that the Total Value Locked (TVL) in DeFi protocols has dropped significantly through the year. This is due to a combination of pessimism and lower prices across the crypto market, with Ethereum (ETH) down nearly 68% year-to-date. Despite this, there are still reasons for optimism as we enter 2023. Projects such as Aave (AAVE) and Uniswap (UNI) have exciting features on the roadmap, and have been identified as protocols to keep an eye on.
Overall, the report has shown that DeFi protocols have the potential to be much more scalable than the traditional financial industry, as well as being more resilient and autonomous. These advantages have been further highlighted by Black swan events, such as the Terra Luna collapse, where decentralized protocols have demonstrated their strength. Despite the Total Value Locked (TVL) in DeFi protocols falling significantly through the year, there is still reason for optimism as we enter 2023.