6 Top DeFi Trends in 2024 by Ayomide Adeleye

Decentralized finance is growing parabolically without any end in sight. This technology aims to create a financial landscape where individuals have easy access to top-quality financial services and products without the involvement of third parties.

Interestingly, numerous DeFi trends are emerging to unlock financial inclusion, efficiency, and democratization. These trends are here to cut unnecessary intermediaries and their fees and promote transparency in the blockchain space.

Interestingly, this guide thoroughly examines six decentralized finance trends transforming the financial landscape.

Trend 1: Layer-2 Solutions

The emergence of layer 2 protocols is one significant advancement shaping the DeFi ecosystem. As an avid user of a DeFi platform, you may have encountered slow transaction times and high gas fees. However, Layer-2 solutions offer quicker and more efficient transactions at low costs.

At its core, a Layer-2 protocol operates a separate network built on the main blockchain (which we call Layer-1). Think of the main blockchain as a busy highway clogged with traffic during rush hour. Layer-2 is a bypass lane that allows vehicles to ply for quicker commutes.

Therefore, this secondary network acts as a processing layer that helps the mainnet handle a significant portion of the transaction workload. These transactions are processed off-chain, which now significantly reduces the strain on the main blockchain. Interestingly, the record is shown on the Layer-1 blockchain when the transactions are completed. This ensures the security and immutability of crypto operations.

Some Layer-2 solutions that operate alongside main blockchains include:

Polygon

This sidechain based on the Ethereum network boasts fast transaction speeds and low fees. It is a popular choice among newer DeFi applications and the deployment of altcoins.

Arbitrum

This is another layer-2 solution of Ethereum, which offers high security and a familiar environment for developers.

According to recent Coingecko data, 43 layer-2 cryptos work side-by-side with top blockchain networks. Their increase in popularity is instrumental in DeFi’s widespread adoption, as they offer these few benefits:

Increased Throughput

By offloading transactions, layer-2 solutions increase the number of transactions a blockchain network can handle per second. This translates to faster processing times for DeFi applications.

Reduced Transaction Fees

Heavy congestion on Layer-1 networks often leads to exorbitant chain fees. Thankfully, as Layer-2 solutions alleviate this pressure, users can conduct DeFi activities at the lowest cost possible.

Enhanced User Experience

Users can enjoy smoother trading experiences on DeFi platforms, in addition to transaction throughputs and reduced fees. This solution is especially needed as the crypto community continues to attract new users.

Of course, some layer-2 solutions are not perfect. While they offer the above perks, they may inherit certain security risks from the main network. 

Thus, individuals should stick with top blockchains and explore the security model of their secondary networks before engaging. As DeFi continues to evolve, this trend will play a key role in upscaling the ecosystem and unlocking its full potential.

Trend 2: Crypto Bridges

The inception of cryptocurrency has led to hundreds of blockchains, each with its strengths and downsides. It’s similar to having different bank accounts with various financial institutions. Now, being able to move your funds from one account to another is how crypto bridges work in Web 3.0.

Users can utilize this bridge to transfer crypto assets between blockchains, thus enhancing easy interoperability. This trend is pretty beneficial when dealing with layer-2 networks. But why is crypto bridge a significant trend?

As highlighted earlier, blockchains like Ethereum may become slow and expensive for everyday transactions. These secondary networks offer faster and cheaper transactions for the average user to transact more frequently. That is when the magic of crypto bridges happens.

For example, you are trying to transfer ERC-20 tokens on the Ethereum network but encounter very high fees. With a crypto bridge, you can transfer all your assets to the side chain of Ethereum, such as Polygon, for inexpensive and seamless trading.

Beyond connecting layer-2 networks, crypto bridges enable seamless token swaps across various DeFi protocols. It’s like using the Zypto App to manage multiple crypto assets on a smartphone. As such, crypto bridges cut off the need to navigate numerous interfaces and simplify the DeFi ecosystem’s swapping processes.

Here are a few perks to this emerging trend:

Increased Liquidity

Users who move assets between blockchains create a larger liquidity pool. This benefits the users as well as DeFi protocols.

Access to DeFi products

By leveraging crypto bridges, users are not restricted to decentralized applications (dApps) built on a single blockchain. Now, they can explore numerous options on other blockchains, unlocking innovation in the DeFi space.

Crypto bridges are becoming popular tools in Web 3.0. They continue to increase interoperability between blockchains and foster a more interconnected landscape in decentralized finance.

Trend 3: Integration with Traditional Finance (TradFi)

Despite DeFi’s increasing popularity, traditional finance holds its place in the financial world. As such, we are experiencing a fascinating convergence between these two dissimilar concepts. We can’t deny the control that traditional finance has had over the years, as it offers numerous products and services. Yet, it is centralized, slow to process, and lacks easy accessibility.

DeFi is disruptive in nature; hence, with innovative instruments, users have permissionless access and transparency. Interestingly, a bridge now exists between this duo. Traditional institutions recognize DeFi’s potential to streamline operations and enhance service offerings. Here are some ways in which the integration is happening:

Smart Contract Adoption

Centralized organizations, such as banks, are making use of smart contracts to automate tasks such as loan approval and transaction settlement. This will help reduce processing times and human error. It will also eliminate the need for intermediaries, thereby lowering the costs for institutions and clients.

Assets Tokenization

Remember NFTs? Real-world assets like real estate or company shares can be tokenized to achieve fractional ownership. Tokenization eliminates barriers to entry. Even the average Joe can take part in investment opportunities that were mostly off-limits in the past.

Decentralized Lending and Borrowing

DeFi protocols provide alternative lending and borrowing options. Institutions are researching the feasibility of such an integration to bring out new products for a broader scope of clientele.

The benefits of the TradFi-DeFi convergence are numerous, but here are a few:

Universal Access

DeFi’s permissionless nature can help bridge the gap between the banked and unbanked. This will enhance financial inclusion and increase access to financial services worldwide.

Increased Efficiency

Smart contracts can help automate and streamline operations within finance institutions. This leads to faster processing times, reduced costs, and increased efficiency.

Innovation

The merging of these two dissimilar worlds fosters a breeding ground for innovation. Users can enjoy the development of new and improved financial products and services.

The convergence of DeFi and TradFi presents a compelling trend towards the future. As these concepts leverage each other’s strengths, users can expect a more inclusive and innovative financial ecosystem.

Trend 4: The Emergence of DePINs – Decentralized Physical Infrastructure Networks

DePINs are among the hippest trends in the whole Decentralized Finance ecosystem. They aim to transform physical infrastructure creation, management, and operation. Sounds cool, right?

Imagine a situation where data centers and wireless networks are built and maintained in a decentralized manner and are powered by the combined efforts of individuals. That’s what DePINs bring to the table.

By participating in decentralized physical infrastructure networks, users can contribute resources and earn crypto tokens. These tokens signify ownership and are easily traded for value in the DePIN ecosystem.

In addition, this trend leverages the power of smart contracts and the Internet of Things (IoT) to create a network of intelligent infrastructure. This automation enables DePINs to adapt to changing demands and optimize resource allocation for a more efficient infrastructure landscape. This trend offers several practical benefits:

It Bridges The Digital Divide

In areas lacking access to traditional internet infrastructure, DePINs can incentivize residents to share their unused bandwidth. This creates an internet network powered by the community, bridges the digital divide, and empowers local economies.

It Creates Smart Energy Grids

DePINs can be used to build power grids that harness renewable energy sources like solar and wind. Smart contracts can manage energy distribution based on real-time user demand. This reduces the reliance on traditional power plants.

It Revolutionizes Transportation

DePINs can play a role in the future of transportation by facilitating the development of electric vehicle charging networks. Individuals with solar panels at home, for example, can contribute excess energy to a DePIN-powered charging network. Thus, they promote sustainable transportation options while getting incentivized by a DePIN platform.

Despite the practical applications, DePINs are still nascent. Yet, their potential to revolutionize infrastructure development and management is undeniable. As the technology matures, DePINs can reshape the way we build and interact with the physical world.

Trend 5: The Rise of Decentralized Exchanges (DEXs) or Automated Market Makers (AMM)

As DeFi grows, there will always be a need to ensure efficiency while maintaining decentralization. Centralized exchanges, such as Coinbase or Binance, have amazing trading speed and ease of use. At the same time, they come with a single point of control. This is where decentralized exchanges step in.

Uniswap, a top DEX platform, allows peer-to-peer (P2P) cryptocurrency trading without any central controlling authority. However, the challenge really comes up when these transactions are to be done seamlessly and efficiently in a distributed environment. That’s precisely where Automated Market Makers (AMM) come into play.

An AMM can be considered a type of “liquidity engine” for a DEX platform. It creates a liquidity pool for traders rather than simply matching buyers to sellers through an order book. Crypto holders can deposit their assets in the pools to earn interest. Traders can take advantage of the availability of liquidity to conduct trades.

Benefits of having AMMs on a decentralized platform include: 

Better Liquidity

AMMs greatly contribute to boosting liquidity problems arising in DEXs. As they incentivize users to provide assets, traders have continuous inflows at their disposal. 

Improved Efficiency

AMMs bring more efficiency to the market by totally eliminating middlemen. Thus, there is reduced time taken to execute trades and amount charged to the end-user. 

Enhanced Security

Liquidity pools are managed through pre-programmed algorithms, which guarantees the absence of human errors or manipulations and makes trading more secure. 

If there’s a success story at the moment, it’s DEXs and AMMs. It definitely attests to their potential to deliver an alternative that would easily overshadow traditional centralized exchanges. This duo is set to continue fueling the DeFi ecosystem’s growth.

Trend 6: Blockchain Gaming

The global gaming industry boasts over 3 billion active users who collectively spend over $280 billion annually. Thanks to the pursuit of new monetization avenues for gamers and developers, this figure is expected to reach about $363 billion by 2030.

Due to the integration of blockchain gaming with decentralized finance, players can receive cryptos when they complete in-game tasks. DeFi protocols unleash the potential of these in-game tokens. These protocols will assist in the seamless transfer of tokens between games, catering to the desires of gamers and developers.

The DeFi world continues to respond to the increasing demand for blockchain gaming. In 2019, Ubisoft developed the first blockchain video game, HashCraft, and has rolled out more immersive titles. 

Also, gaming platforms like BitSport allow crypto holders to participate in professional gaming and stake their tokens. This development opens avenues to earning interest on staked tokens or even a share of the gamer’s winnings.

The convergence of blockchain gaming and DeFi presents a multi-billion-dollar opportunity. We expect to see more groundbreaking gaming experiences that empower players and unleash developers’ creativity.

Conclusion

DeFi has introduced numerous trends into the financial space to enhance innovation and earning opportunities for users. This guide has revealed fantastic trends, from crypto bridges to Blockchain gaming. 

In a nutshell, these concepts point to the need for more democratization in the DeFi space. Notably, Zypto stands at the forefront of DeFi innovations, and its secure payment gateway can empower businesses to transact seamlessly. 

We can expect more trends to occur, and our in-house experts at Zypto are available to provide more details regarding their emergence. Check out our website for more exploration of Zypto and its offerings.

What are your thoughts regarding these six trends? Which ones have you engaged with in your crypto journey? Let us know in the comments below.

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