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The concept of decentralized finance emerged about 2017, a few years after the Ethereum Blockchain was launched. Since then, the DeFi field has drawn the interest of a wide range of major thought leaders, influencers, and investors.
The overall goal is to decentralize financial activity and give individuals financial authority. DeFi has been transforming the financial world, and as a result, many financial experts and players believe the network to be the future.
Without a question, 2022 was a fairly sad year for the world of crypto and DeFi in general. Scams, hacks, rug pulls, and other illegal acts have drastically eroded the industry’s confidence. In comparison to the preceding two years, market sentiment for cryptocurrencies has been much lower. This has also slowed the advancement of blockchain and DeFi technologies.
As we enter the new year, it’s crucial to consider some of the main forecasts for the industry in 2023, as well as how the market may change or alter in the next year.
Not everything in 2022 has been bleak and gloomy. Blockchain usage has increased across all industries. In particular, the banking industry has boosted its blockchain market share to 29.7% from 11% the previous year. JPMorgan, one of the largest organizations in the Banking and Financial Services market, completed its first blockchain transaction utilizing the Polygon network last month. Citigroup has also expanded its blockchain investment this year.
This year's adjusted TVL (total value locked) on DeFi protocols climbed from $60 billion to $142 billion. In 2021, Ethereum was the dominant blockchain network for all existing and emerging DeFi initiatives. Although Ethereum's supremacy remains in 2022, the market share of alternative blockchains like Solana and Polygon has surged this year.
DeFi sparked the cryptocurrency market in the summer of 2020, ushering in the modern era. Thanks to the great liquidity. DeFi thrived during the Fed’s huge quantitative easing, thanks to its expensive assets and high mining returns.
Notably, this year’s crypto winter market has understood that DeFi, which is totally blockchain-based and very transparent, maybe the answer to the innovation conundrum of non-compliant financials. DeFi and TradFi merged this year, and several conventional financial institutions joined the area to capitalize on the potential prospects.
Now, a cryptocurrency community is constructing a new financial infrastructure called Ground. For the first time in hundreds of years, the barter economy makes sense: humans can trade and exchange value peer-to-peer Fashion without relying on third intermediaries.
However, as DeFi determines, this time there will be no boundaries or obstacles. For instance, DeFi ventures have created more money in finance in the last three years than the whole banking sector had in the previous 25 years.
The ecosystem, in particular, has over 30 million users and tremendous network effects. The degree of creativity afforded by DeFi composability is astounding, and the fact that cryptocurrencies and DeFi operate on transparent and open networks using open-source code makes it essentially unstoppable.
Furthermore, because DeFi breaks down corporate borders between institutions, it opens up the possibility of exceptional capital efficiency.
This year's sector has been roiled by frauds and hacks ranging from Celcius to FTX exchange. Over $1 billion in customer monies were lost in the latest FTX crash alone. Due to a shortage of money to handle customer withdrawals, major cryptocurrency investment platforms such as BlockFi have also declared bankruptcy.
The continuous popularity of these events in 2023 has obviously sparked worries about more industry rules. Binance CEO CZ has previously issued a statement in favor of more regulatory oversight of centralized exchanges. US President Joe Biden is advocating for a comprehensive regulatory framework for digital assets and transactions, along with other G20 countries. These developments and existing market conditions suggest that in 2023, cryptocurrency and DeFi marketing will face significantly more regulations.
The failure of centralized exchanges on a consistent basis this year has demonstrated that transparency and control are the most important features of this business. Many consumers have discovered the hard way that entrusting their assets to centralized exchanges is not a wise idea.
Although DEXs are frequently sophisticated and demand more due diligence from the typical user, such systems provide total transparency and control. Users do not have to hand up their monies to a firm; instead, they have complete visibility into how their assets are held or invested within the platform. As a result, 2023 has the potential to be a watershed year for DEXs, with more new capabilities appearing in DEX apps and platforms.
Following the spectacular failure of Terra LUNA and its UST stablecoin, the market has been highly wary of stablecoins that lack adequate audit processes to confirm their assets and preserve their dollar peg. Due to a lack of user involvement and acceptance, some tier-2 stablecoins have already failed in 2022. Such monitoring may continue in 2023 since the number of new stablecoins entering the market is expected to remain modest. USDC and Tether have the ability to continue to dominate the market.
ETH is on course to exceed BTC in terms of growth and scalability by 2023. The long-awaited Ethereum merger occurred in September of this year, moving the network's consensus architecture from the power-hungry mining-based Proof-of-Work (PoW) framework to Proof-of-Stake (PoS). This not only made the popular blockchain more viable, but it also dramatically reduced the quantity of ETH tokens.
This will benefit ETH in 2023, and the network’s border flexibility may allow Ethereum to surpass Bitcoin.
Overall, 2023 is shaping up to be a pivotal year for DeFi, blockchain, and cryptocurrencies. As market confidence remains low, the community will be expecting an improvement as we enter the new year.
All the above listed the DeFi predictions and trends in 2023. This prediction helps business entrepreneurs to move forward in their DeFi business growth. These predictions will help to make their business strategy according to the technology update to enhance the growth of their venture.
Clarisco is a top-notch DeFi Development Company with extensive experience and expertise in dealing with the different business requirements of conventional and modern organizations. Clarisco's subject matter specialists are well-versed in all of the cutting-edge Decentralized Finance Development technologies and platforms now in use in the worldwide market. Contact a professional immediately to discuss your company's requirements!