The COVID-19 pandemic undoubtedly took the world by storm, disrupting business as usual in several industries. However, it transformed the decentralized finance (DeFi) market beyond recognition, triggering a 14x growth rate following the lockdowns. In 2021, the total value of transactions of blockchain networks exceeded $112 billion.
However, there have been a lot of developments and events that have made this unprecedented growth possible.These developments include the emergence of new DeFi platforms and technologies and the rapid adoption of digital currencies, such as Ethereum, Bitcoin, and Stablecoin.
Moreover, the rise of Web3 in Industry 4.0is accelerating the development of new DeFi solutions and technologies every year. So, whether you’re a savvy user/investor or a newbie looking to grab apiece of the DeFi pie, staying connected to the latest happenings in the industry is essential.
In this post, we’ll share 7 DeFi trends for 2022 and beyond so you can learn what’s happening in this space and navigate the growing crypto economy.
7 DeFi Trends for 2022 and Beyond
1. Governance Tokens to BecomeMainstream
The call for eliminating banks, exchanges, intermediaries, and other traditional financial intermediaries led to an exponential growth in users entering the DeFi space. However, regulation has become a hot topic in the industry since no central authority provides fund protection. As a result, governance tokens are becoming an essential aspect of modern DeFi platforms.
These tokens give holders voting rights when making decisions related to the underlying DeFi protocol. Holders can vote for different initiatives that can increase the token’s value.
Aave, one of the largest DeFi lending platforms worldwide, quadrupled its governance token value in less than a year since early 2021.
2. An Influx of Monetized Blockchain Games
According to Statista, there are currently 3.4 billion gamers worldwide using different consoles and mobile devices to explore titles from different genres, including sports, shooters, role-playing, puzzles, real-time strategy, and action-adventure. In 2021, the total amount consumers spent on gaming products and services exceeded $160 billion. This number is expected to double in the next few years.
With more people playing games during the pandemic, blockchain developers and gamers are demanding more monetization in the industry. Since these games run on blockchains, players can mine tokens asa reward for completing tasks or missions.
As a result, developers are introducing newDeFi protocols to simplify transfers to and from games so more people can make money from the time spent on entertainment. In recent years, we’ve seen games like Cryptokitties, HashCraft, Axie Infinity, and Star Atlas become popular.Therefore, we can expect a massive influx of blockchain games in the market.
3. Mining for Liquidity
The pandemic led to several epidemics looming behind the curtain. Whether it’s the rapid rise of mental health issues due to isolation caused by remote work or the Great Resshuffle, COVID-19 has ignited several positive and negative movements while keeping most of the attention on itself. In the DeFi space, the biggest epidemic that emerged in2020 was liquidity mining.
By definition, this is nothing more than an investment strategy used by DeFi users on a platform to make it easy for others to trade their crypto assets in exchange for a percentage or reward.
While this incentive has prompted more investors to secure a decentralized network for their crypto assets and offered high liquidity for new platforms, it has also increased the risk of security threats and technical issues in smart contracts. Regardless, the trend is becoming more popular worldwide, especially following the rapid drop in crypto prices.
4. The rise of Crypto Bridges
One of the most difficult aspects of crypto investments involves navigating multiple blockchains in the growing cryptoe conomy. Unfortunately, many coins and tokens remain native to a single blockchain network. Hence, they cannot be transferred or used on another blockchain. For instance, you cannot use Ethereum on the Stable Coin chain.
For years, this has presented a problem for investors looking to explore new blockchains as they didn’t have a tool or mechanism to enable multi-platform token or coin exchange. However, times are changing with the introduction of crypto bridges equipped with the technology to enable cross-chain transfers, such as from Terra to Ethereum.
Users can choose from two bridge types –trusted or trust less bridges. Trusted crypto bridges have a centralized infrastructure, meaning a central body regulates the transactions and assets.In contrast, trust less bridges involve the use of smart contracts and don’t require the involvement of third parties.
5. The Growth of SyntheticSecurities
Finally, another emerging DeFi trend for2022 and beyond is the growth of synthetic assets in the market. Unfortunately, the market cap for crypto assets, including coins, tokens, NFTs, etc., is extremely small compared to the market cap of traditional assets, such as stocks and real estate. As a result, developers are now creating synthetic securities to trade traditional assets on blockchains using smart contracts.
For instance, Terra’s Mirror Protocol app enables users to buy traditional stocks, such as Microsoft,Alphabet, Amazon, or Apple, using tokenized derivatives that track their current share prices and performance. Other benefits of synthetic securities include borderless transfers, yield farming, and round-the-clock liquidity.
Although the trend isn’t popular in the US yet due to high Nasdaq and NYSE regulations, synthetic trading is rapidly becoming mainstream, especially among users looking to diversify their crypto portfolio with traditional assets.
So, there you have it – 5 emerging DeFi trends to watch out for in 2022. Of course, several other trends are looming in the industry. However, these developments are causing a large-scale shift in the DeFi industry. As you may have read, smart contracts are becoming incredibly popular in the space, with several platforms using them to enable and secure crypto transactions.
However, these contracts are susceptible to security threats and errors, so you need a powerful tool like the StaySAFU scanner to audit different tokens and contracts to make a more informed decision.