Ethereum stands to benefit greatly from DeFi "eating" traditional finance

Unitimes

特邀专栏作者

2020-05-30 12:51 (UTC+8)

This article is about 1197 words, reading the full article takes about 2 minutes

As DeFi continues to grow, the Ethereum network, especially its native token ETH, will benefit.

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As DeFi continues to grow, the Ethereum network, especially its native token ETH, will benefit.

Editor's Note: This article comes fromUnitimes（ID：Uni-times）, by Nick Chong, published with permission.

Editor's Note: This article comes from

, by Nick Chong, published with permission.

For supporters of DeFi, as far as the current situation is concerned, it is still a relatively distant dream for decentralized finance (DeFi) to surpass or compete with Wall Street.

DeFi applications have been attacked by many hackers. For example, a hacker recently stole $25 million worth of ETH and other encrypted assets from the decentralized lending platform dForce; and because the public still does not understand or even misunderstand DeFi protocols and cryptocurrencies However, there is clearly a need for more education on how these DeFi applications work.

Despite these barriers to entry, one prominent investor believes it’s only a matter of time before DeFi “cannibalizes” traditional finance.

Investor Explains Why DeFi Will 'Eat' Traditional Finance

Cheong explained that with the introduction of Ethereum’s trustless and permissionless system, DeFi brings value beyond traditional banks because it “can provide universal financial services.” As a result, the DeFi industry can and will provide “better products and services at scale than traditional finance.”

He illustrates this assertion with the following graph, which shows the supply of stablecoins on the Ethereum blockchain. Demand for “crypto dollars” (stablecoins) has gone parabolic due to the recent dollar shortage, with assets like USDT somewhat filling the gap in global demand for dollars.

image description

The supply growth trend of major stablecoins

It’s worth noting that there’s no hard evidence that a real-world dollar shortage is causing a surge in demand for crypto dollars, but the timelines do fit.

With apps like Aave and Compound offering (relatively) high interest rates, coupled with low (or even negative) rates offered by traditional banks, the case for DeFi bullishness is even stronger, the investor added.

Ethereum stands to benefit greatly from DeFi

Many blockchains have their own roles in the DeFi space - the Tron network has JUST (a stablecoin lending platform), the Bancor protocol runs on the EOS network, and even Bitcoin is traded as a cryptocurrency exchange and financial services company Abra medium.

But overall, DeFi is a trend centered around the Ethereum blockchain, which is estimated to have an $800M+ DeFi ecosystem.

This means that the Ethereum network, especially its native token ETH, will benefit as DeFi continues to grow.

ETH

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