The future for decentralized finance looks bright. While the rest of the world will remember 2020 as the year of Covid19, for crypto heads it will also be the year that decentralized finance, also referred to as open finance, finally broke through to make its presence known. Some truly astonishing progress over the course of the year witnessed the Total Volume Locked (TVL) in DeFi protocols surpass $16 billion by December, from a starting point of around $600 million in January. Today the TVL figure sits at over $30 billion.
The rapid growth of DeFi does not offer the complete picture however. The sector still only constitutes a fraction of the overall crypto market, reflected in the fact that only a small percentage of cryptocurrency trading volume occurs on decentralized as compared to centralized exchanges. DeFi as a whole is still playing catch up, with a lot of ground to cover.
There is also still a perception, even among crypto users, that DeFi is overly complicated to understand and difficult to get to grips with. That is why the next generation of DeFi tools are setting out their stall to make the sector better than ever by giving newcomers a helping hand.
One of the many ways in which the sector is becoming better is with the proliferation of robo advisors, automated money managers that allow users to participate in DeFi without understanding every tiny detail. For instance, finding the very best yield farming strategies can be a time-consuming and complex affair, requiring a high level of knowledge and understanding.
DAOventures are one of the innovative companies seeking to simplify yield farming and other DeFi products for the masses. From a single simple user interface users can browse a huge number of curated products and check historical, as well as potential returns. Users then select their preferred strategies according to risk profile with the DAOventures robo advisor handling the rest. Among the myriad of benefits of using a robo advisor service is the pooling of users’ funds, meaning that transaction costs (gas fees) are split across the entire group.
Decentralized exchanges are another area improving quickly. Historically the DEX has suffered from limited liquidity and the perception of a poorer user experience, making them second best to centralized exchanges. In 2020 that began to change. The humble DEX not only gained greater liquidity, but aggregator services allowed users to shop around for the best exchange rates across multiple platforms from a single user interface.
Now that concept is being taken to the next level with aggregators combining the very best of both decentralized and centralized markets. Finxflo is among the next generation of aggregators combining decentralized protocols with centralized exchanges to bring the entire market to heel. The company describes itself as a hybrid liquidity aggregator, and as the name might suggest, they aim to bring the deepest possible liquidity to users.
With a number of projects bringing next generation services to decentralized finance the future of the sector is certainly looking healthy. From robo advisors to hybrid aggregators the future of DeFi will be more convenient, safe and secure than anything that has come before.