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DeFi may cause a Real disruption of the ecosystem, according to the Federal Reserve bank paper.

The ethereum blockchain has led to so many possibilities, which has led to so much innovation, including Defi. There’s no doubt that innovation has created so much efficiency and opportunities.

The Federal Reserve Bank of St. Louis researched decentralized finance and how ethereum has led to its development. The research paper was done by Fabian Schär, Who highlighted the influence of decentralized finance on the financial industry. Even though their security concerns and risks, the benefits that come from it are much more. The are chances that a solution will be found for the risks and security concerns.

The ecosystem

Like other applications, the main thing that gives decentralized finance an advantage is the blockchain application that increases transparency, reduces costs, and makes everything efficient. Its ability to increase efficiency may lead to a paradigm shift in the financial industry. 

Due to its usefulness and application, decentralized finance has grown by 700% in the last year. So far, the total value in the ecosystem stands at 134 billion dollars across different blockchains. 

Decentralized finance ecosystems are based on smart contracts, which is a prominent feature of the ethereum blockchain. The report does not talk about only the decentralized finance ecosystem but also the decentralized finance-related tokens. According to Schar, most DeFi protocols Use ether as collateral. So far, there’s about 9% of the total supply of ether locked up in Defi.

Since the pandemic struck, there has been a massive growth of digital assets, which means the potential of Defi is still growing with time. With institutional investors on board and an increase in demand for investment options, the future of Defi is big.

So far, the highest number of ethereum addresses interact on Defi protocols which, according to the Defi reports, stands at an all-time of 1.75 million, having grown ten times more since the beginning of 2020. This year, in particular, ethereum has been very bullish, which has made it or perform Bitcoin and propel the acid into an all-time high of $3500. Even though Bitcoin has been the king of cryptocurrency, ethereum may quickly take up the position due to the applications of the ethereum blockchain. It is interesting to see the evolution of the crypto ecosystem and the exciting Innovations coming up every day. 

Image by Akshara Sing From flickr.



Marcia is a real crypto fan, specialized in bitcoin and NFT news.


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