In this article I’m going to write about a niche that’s very hot lately in the crypto space - and that is Decentralized Finance, Defi for short. So I'm going to give my opinion about investing in this very promising piece of the crypto market in general.
For those who don't know what Defi or Decentralized Finance is, it is basically a blockchain version or decentralized version of Finance 1.0 such as banking. So many things that have to do with Finance 1.0 are currently being built in Finance 2.0 version, on the blockchain, i.e. in a decentralized way. It is so exciting because of course, this is a very big industry and we can see that some of the leading projects in the Defi space are doing so well. It is very exciting for many people that are currently finding out what Defi is and what the potentials for these Defi cryptocurrencies are.
If we take a look at Defi platform like Defi Pulse, we see that the value of total defi assets locked up, at the time of writing this article, is over 10 billion USD. And if we take a look at the Eth value of this amount, that is over 6million ETH currently locked up in Defi applications. Very interesting because as we can see over 6 million ETH, that's about 5% of the total supply of Ethereum currently being in circulation. So about 5% of all ETH in circulation is already locked up in Defi, and we're just getting started in terms of decentralized finance.
Going by the above statistics, we can see that Ethereum is playing a very crucial role, since it is the platform where almost all Defi applications are built.
As exciting as it could be, I personally, I’m not comfortable in investing in any of these individual projects. Why not? To me Defi is relatively very new and so one cannot measure the reputations of most of these projects. And for me, it’s a bit too much of a risk to invest in these new individual projects.
So even though I am very bullish on on Defi in general and what its potential is, I’d rather like to invest in the infrastructure on which Defi projects are built. And the first piece of infrastructure is of course, Ethereum. It is the blockchain on which over 200 Defi applications are already built, only 22 built on EOS, and 23 on Bitcoin. The ones built on EOS and Bitcoin are not very successful like those on Etherium . So for Ethereum, Defi applications will be a very important factor in its next bull run.
What I’m saying in essence is that Ethereum will benefit from the success of Defi and Defi will benefit from success of Ethereum. The biggest and the most important Defi applications are all built on Ethereum. So instead of investing in these individual projects, I prefer to play safe by investing in the infrastructure that powers them – Ethereum.
It’s my opinion, though. I’m not your financial adviser so don’t take my word for it. Remember to always DYOR .