One aspect of web3 that should not go unnoticed is DeFi. Being one of the major pillars in crypto, it changed the landscape of how individuals are able to earn. While the growing popularity of DeFi continues to grow amongst retail investors at a rapid pace, we see institutional adoption taking small steps towards getting a piece of the pie.
The biggest web3 event this year Token 2049 hosted the Co-founder of 1inch Network, Sergej Kunz, Haseeb Qureshi the managing director of dragonfly capital, Chen Fang the COO of BitGo, Ken Timsit the managing director of Cronos and Brian Gallagher the co-founder of Partisia blockchain who talked everything about DeFi and institutions.
With an over 1000% increase in TVL for DeFi, we see the arrival of large players into the industry along with new products with a focus on institutional adoption such as 1inch’s Pro and Compound Treasury.
While significant efforts have been done for greater adoption in the space, we also see ESG approaches taken within DeFi. The success of the recent Ethereum Merge transmitted the second largest cryptocurrency, in terms of market cap, into a more energy efficient network, “shutting the environmental critics.
The Ethereum Merge and Institutions
Inna Daurova reflected how “the merge is a good step forward to onboard more institutions,” while the success of the recent merge has taken a long time coming, it is of paramount importance for it to be executed in a right and secure manner.
Chen Fang, COO of BitGo, added that “from an R&D perspective, it is one of the most exciting and impressive feats of engineering in the history of crypto.”
However, to Brian Gallagher of Patricia Blockchain, “it is a huge hit for decentralization...and exposes the problem already existed.” His concern stemmed from how there are only three entities now controlling over 50% of private keys.
Other industry leaders in the space share similar sentiments. Founder of an “Ethereum Killer”, Avalanche, Emin Gün Sirer briefly talked about how Ethereum is more centralized than it was before the merge.
“We have 99 problems to solve” and PoW was one of them, but “Ethereum has proven everyone wrong.” Now, with one less problem that needs solving, the space can now tackle other problems such as prime brokerage, liquidity pools and the inflow of market makers.
“We need to collectively work on other problems now” added Ken Timsit the MD of Cronos Labs is solved, we see adoption.
NASDAQ moving in for custody in ETH and BTC
The topic of Nasdaq starting a crypto custody service for institutional clients is a positive sign for the greater crypto market. COO of Bitgo, Chen Fang added “it is good to see top brands moving into the space… I am bullish on the fortune 500 brands in pushing crypto.”
While we see big players across various industries adopting crypto, Haseeb Quresh thinks otherwise. To the managing director of Dragonfly capital, “institutions coming into crypto is a symptom of the cause.” This essentially means crypto will make its own success with the disruption of the current technology, and not being popularized by NASDAQ or any institutions.
Furthermore, Brian talked about how the two industries (DeFi and TradFi) are “incompatible with one another.” The introduction of derivatives and complex financial tools into crypto will “highly jeopardize” the integrity of Bitcoin. Options (as an example) trading will see individuals taking on “hyper leveraged” positions as paper trading of non-physical Bitcoin with more bitcoin being traded than its max supply without needing to move the actual bitcoin.
However, adoption, in general, is still positive for the entire ecosystem. The growing demand for crypto will naturally draw talents from the TradFi space into crypto, which will contribute to shaping the future environment of the crypto space.
While the nature of the traditional finance we know of is of a closed-sourced nature, DeFi is the complete opposite, the very foundation of it is of an open-sourced nature. This means that by building an ecosystem based on those principles, “it will give birth to new innovation and creatively, with a different approach to modernization and intellectual property.”
In summary, Celsius, took money from retail investors and went off-chain to degen. Haseeb added that Celsius “was basically an unregulated hedge fund.” On top of spiralling the crypto markets into extreme fear, the collapse of Celsius stirred media outlets in having “bad takes” on crypto.
However, left to their own devices (with smart contracts), the lights of the current DeFi platforms like “Compound, MakerDAO, Uniswap, dYdX and 1Inch among many others, worked beautifully without any bankruptcy…all these worked because there was no human discretion.”
Without the use of human discretion, “crypto will never break.” The current DeFi removes all humans in the equation and shows it in a way TradFi can’t, in a transparent manner.
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: Chain Debrief