When the history books are written nearly cryptocurrency, 2020 will exist remembered every bit the twelvemonth decentralized finance exploded in popularity.

A powerful illustration of how this young, often misunderstood infinite has grown comes from DeFi Pulse. At the start of Jan, the total value locked in DeFi protocols stood at $675 million. Since then, records have continued to be smashed — and at one point in December, this figure hit a staggering $15 billion. That's a surge of 2,100% in less than 12 months.

Even though there take been signs of a chimera, crypto heavyweights such equally Binance CEO Changpeng Zhao have said that they expect DeFi is hither to stay — and that in that location'south "a lot of growth potential" in this burgeoning space.

Nonetheless, critics argue that DeFi needs to evolve and mature every bit we caput into 2021. This year has also been dominated by endless forks — and a serial of projects emerging with near-identical (and often food-related) names. There's been a lack of sustainability as traders flock from one protocol to some other in search of the healthiest returns, and the sudden cosmos of new platforms past opportunistic developers has led to devastating security vulnerabilities that have sometimes acquired tens of millions of dollars to vanish into thin air.

Indeed, Cointelegraph recently reported on new research past the data company BraveNewCoin, which warned there are eighteen serious "not-financial" risks in the DeFi sector. Scalability dominated this listing — with network congestion resulting in high gas fees and failed transactions, causing protocols to malfunction.

The dangers don't end here. Smart contract vulnerabilities tin be exploited through flash loans, oracles tin cause protocols to receive inaccurate toll data, inter-connexion can mean many protocols demand to rely on others to function, and there'south a risk of centralization creeping into the manufacture likewise.

Realizing long-term benefits

It's worth noting that many critics are enthusiastic most how DeFi can deliver secure, robust and permissionless transactions in a way that centralized platforms but cannot match. However, their argument is that DeFi is underdeveloped in its current form — meaning that the infrastructure required to evangelize true modify just isn't ready yet.

Parallels take been drawn with the stock marketplace in the 1980s and 1990s, when orders were called in by phone and traders were left uncertain about the precise time they would exist executed — and how much information technology would end up costing.

In some cases, DeFi protocols have been compared to a manufacturer of a cutting-edge electric vehicle who boasts about how sophisticated their battery technology is… without paying attention to the tires.

For the manufacture to evolve, advocates say that a solid bridge is needed to connect DeFi with the traditional financial world — helping it to evolve across an experimental playground. This would deliver the technological robustness that's needed to avoid devastating exploits, encourage greater involvement in the infinite, and event in the infrastructure that's needed for large transactions to take place securely, cheaply and immediately with fiddling to no slippage.

Moving away from farming and mining

New entrants into the market place such as iob.fi DAO believe that, in the non-besides-afar future, the word surrounding DeFi will movement away from mining, farming and flash loans to "real, sustainable and consistent returns."

The platform describes itself equally the first tokenized, actively managed DeFi hedged pools — an environment where traders can gain exposure to cryptocurrencies, stocks, bolt and indices in one place… all from a Web3 wallet.

According to iob.fi DAO, this can deliver advantages because most asset classes have different price cycles. Whereas Bitcoin may be in the clout one week, it may trade sideways the post-obit week as Wall Street embarks on its bull run.

Iob.fi DAO says it is establishing a bridge between professional Wall Street firms and crypto through Prodefy — a suite of tools that is ready to connect traditional loftier-performance trading systems with Web3-enabled DeFi platforms in 2021. The utilise of Web3 is described as crucial because of how it is futurity proof and tin can be easily upgraded as better technologies become bachelor.

Iob.fi DAO says that Prodefy volition be crucial to achieving adoption because traders in the City won't need to significantly modify their trading systems or create a new one. This will intermission down barriers between the two markets — at a fourth dimension when institutional interest in cryptocurrencies is continuing to grow, and a number of companies are buying tens of thousands of Bitcoin to agree in reserve.

An advanced automated trading arrangement has besides been developed called ioBots — a collection of tools that takes a dissimilar arroyo to asset direction, trading decisions and risk direction in light of crypto's on-concatenation nature.

Overall, iob.fi DAO says that its goal is to evangelize consistency — describing it as the well-nigh important ingredient in successful trading.

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