With the increased acceptance of cryptocurrencies, several platforms came up with the idea of leveraging the use of blockchain to create different ecosystems. Ethereum, the second-largest cryptocurrency by market cap, was the first to introduce the concept of smart contracts which are lines of code deployed on top of the blockchain to perform a particular task. The task might be the collection of funds in a liquidity pool or distribution of rewards for liquidity providers. Smart contracts entirely automate the task without any human intervention. Furthermore, because smart contracts run on the blockchain, they operate exactly as programmed without any censorship, downtime, fraud, or third-party interference. Smart contracts require an open and decentralized database, which all parties trust and which are fully automated - the entire environment itself has to be decentralized for the smart contract to be implemented. The Ethereum Blockchain is the ideal environment for smart contracts to be built and executed which is why the Ethereum Blockchain is the leading platform for DeFi applications.
Decentralized finance eliminates the necessity of third-party agents and intermediary costs and this subsequently allows DeFi users to accumulate better rewards than otherwise possible. Furthermore, the volatility of crypto assets is such that higher rewards are demanded by most DeFi users today.
DeFi reached $170B within twelve months since the first case of COVID was discovered. Today, the DeFi landscape is fragmented with trading, lending, borrowing, staking, and mining services across various platforms, including Ethereum, Binance Smart Chain, Polkadot, Tron, and many others.
Fall of FTX and Alameda Research
A lot has been happening in the crypto space since the bear market started in November 2021. The market witnessed the collapse of big platforms like FTX, high-yield DeFi protocols like LUNA, big VCs like 3AC, and many others. Most recently in January 2023, Genesis filed for bankruptcy after being charged by the United States Securities and Exchange Commission for illegally selling crypto.
With increasing interest rates and lower access to liquidity following the efforts of central banks to counter inflation, investors at both the retail and institutional level may look towards alternative forms of DeFi investment as a hedge against inflation, with compound interest coupled with adequate use cases likely to engender this value-add in decentralized finance.
With all these negative sentiments flowing in the market, it is not difficult to say that the coming days for investors and retailers will be harsh. Despite the bearish market, Roseon has decided to use this opportunity to expand its ecosystem. The launch of a decentralized exchange will bring more utility to its native token and give more power back to the community and users.
Many potential users are interested in entering the world of cryptocurrency and Defi and whilst the amount of crypto flowing into decentralized platforms is continuously increasing, there are huge barriers to entry that dissuade them. The learning curve is extremely steep due to the complexity of the instruments and speed of market evolution that creates a barrier limiting the entry of many retail users.