Executive summary: State of DeFi in 2023 (March 2023)
In this article, I delve into the current state of DeFi in 2023, examining the impact of DeFi Winter, the major DeFi protocols still standing, the challenges the industry faces, and the potential avenues for growth and future improvements in the decentralized finance ecosystem.
Summary: The State of DeFi in 2023 document explores the current condition and future potential of DeFi, analyzing its challenges, and showcasing the protocols still in operation.
DeFi Winter in Numbers:
- Total valued locked in DeFi has dropped 75% since 2022.
- DEX volume has also been affected by DeFi winter.
- Despite challenging conditions, there are reasons for optimism, such as reduced Ethereum fees and promising trends in the DeFi to ETH market cap ratio.
The State of DeFi Now:
- Major DeFi protocols still in operation include Uniswap, Curve, Aave, Synthetix, and dYdX/GMX.
- Uniswap remains the biggest DEX due to its liquidity provision and working capital requirements.
- Aave is working on decentralized stablecoin GHO and Lens Protocol to stay relevant in the market.
Problems Plaguing DeFi:
- Current DeFi systems are complex for newcomers to grasp, which makes it difficult for mainstream adoption.
- Solutions must be developed to make DeFi not only more accessible but also more secure and useful for users.
The Future of DeFi:
- Real-world Assets: Tying DeFi to real-world assets enables new borrowing and lending opportunities for physical assets.
- DEXes: Integration of DEXes into existing centralized platforms and communication between different blockchain networks may result in increased adoption.
- Appchains: By creating dedicated blockchains for each application, scalability and efficiency can be improved within the DeFi ecosystem.
- Undercollateralized Lending: Exploring methods of credit assessment and risk assessment can help promote DeFi adoption among those with fewer collateral options.
- UX Improvements: Streamlining user interfaces and providing easy access to key features can help to further extend the reach of DeFi to traditional finance users.