Decentralized finance (DeFi) is a term used for financial services that use smart contracts on a blockchain. It is an emerging technology that utilizes secure distributed ledgers.
DeFi Networks See Losses
This article in CoinDesk indicates that DeFi centric blockchain networks Solana, Polygon, Tron and Avalanche have seen losses, as has Decentralised exchange Uniswap and Convex. In fact, the total volumes have dropped a bit, the total volume is now reported to be US$67.3bn. It remains unsafe for regulated entities to participate in these unregulated and markets as smart contract confusion and anonymity continue to haunt these environments:
“Global crypto market capitalisation stands at US$1.14tn this Tuesday morning, marking a 3% drop in the past 24 hours.
Bitcoin fell 2.6% to head below the key US$24,000 price point, while roughly 4% was chipped away from Ethereum’s impressive recent rally.
Fan engagement token Chiliz was one of the few daily risers, surging 15.5%, while decentralised blockchain network Ankr added over 7%.
Blockchain networks as a whole continued to trend downwards though, with Solana, Polygon, Tron and Avalanche all encountering low-single-digit losses.”
DeFi and Smart Contracts
Smart contracts are an essential part of decentralized finance. Smart contracts require when/if statements written within the blockchain code. In order to use DeFi, it requires a smart contract solution and the same Oracle that the smart contract uses. Read more on this here.
The Need for Regulations
The need for regulations has been catching up to the rapid adoption of decentralized finance products over the last several years. There is the need to weigh the transparency that is gained by KYC regulations with user privacy, which is at the heart of decentralized finance. Read more on this.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group