2022 could have been better for decentralized financial systems (DeFi). Because of the unsustainably high returns, the whole sector imploded, ultimately leading to the business model's collapse. But the genre of DeFi is by no means extinct.
A notable Web3 developer by the name of Andre Cronje expressed a perspective that was quite similar to this one when he stated that he does not feel that higher returns are "far gone" and that DeFi is witnessing nearly "zero growth."
Even though the market has been relatively quiet because of the challenging year that just passed, the actual yields for ETH, USDT, DAI, and USDC are currently considerably greater than they will be in 2020. The actual returns that are often made available by DeFi protocols come from the loan market and trading costs.
Investors who engaged in short selling have previously liquidated their token holdings. According to Cronje, however, this group of market participants does not yet have the confidence necessary to close their trades, which would signify the "true yield low point."
The sector is now mired in the low volatility period of the extended bear market that it has been experiencing. Therefore, Cronje indicated that he does not feel that the age of high yields is "far gone" since he believes this is analogous to comparing "the current market with an unrealistic and very deluded market top" rather than the evolution of the market.
In a recent article on his blog (1), the inventor of 'Yearn.Finance' said that a clear linear growth chart might be obtained by plotting a growth chart on TVL, yield, and trading volume and then flattening the curve to prevent oscillations. Real yield and defi have shown significant increases across every currently available indicator.
The creator drew a parallel between the period and the dot-com boom, saying that the period did not kill the internet and that it deserves a subsequent story.
"The initiatives initiated amid that craziness ultimately matured into the foundational goods that we depend on in the present day."
He said that for DeFi to function, it does not require a new story or a "bright new gadget." Cronje asserted that DeFi, in addition to other blockchain sectors such as social networks, gaming, art, and journalism, will continue to exist in the foreseeable future. He conceded that the exposure to the technology involved was limited in its current condition.
A Favorable Environment for DeFi in 2023
In the second half of 2022, significant deleveraging pressures were a primary factor in the failure of several large crypto currency enterprises. During the same period, there was a drop of more than 76 percent in the total value locked (TVL).
Despite this, industry experts think these failures will pave the way for "grander breakthroughs in the future." This information was presented in OKX's most recent report, which asserted that the area would undergo "revitalization" in 2023.
In addition, Pantera Capital, an institutional asset management focused on blockchain technology, predicted that DeFi will serve as the basis for the subsequent cycle of the crypto currency business.