By Jay Hao, OKEx CEO
DeFi has quickly become the new buzzword in the crypto space. Yet, unlike ICOs or some of the other unsustainable practices we’ve seen in the past, DeFi is here to stay – and it’s gaining momentum fast.
As a centralized cryptocurrency spot and derivatives exchange, people sometimes wonder if DeFi is a threat to OKEx or if the rise in DeFi-focused altcoins is a challenge for bitcoin. In actual fact, we believe that the growth of DeFi can only be good for the space and all the players in it.
The Burgeoning DeFi Space
Earlier this year, DeFi passed an important milestone. The cumulative value of tokens locked in DeFi applications soared past $1 billion in Feb 2020. Like every other area, it faced some headwinds shortly after with the massive market sell-off, yet it was quick to recover its value. By the middle of June, that figure had recovered again. A little more than three weeks later, it had ballooned to reach $2.14 billion on July 8.
With this kind of growth, DeFi is an area that no cryptocurrency business (or indeed, traditional finance business) can or should ignore. It will mark the way forward for the next wave of crypto adoption and provide the industry with an important alternative to fiat-crypto exchanges to getting more fiat on-ramps. It will also allow the space to finally, really service every individual on the planet with the financial services they need to lead dignified lives and participate in their local economies.
OKEx Supports the Growth of DeFi
We believe that DeFi is not going to remove the need for centralized exchanges nor will cryptocurrency erase the traditional financial system.
All this can co-exist to make the world a better, fairer place in which traditional institutions are more accountable and people are more educated about their personal wealth and have more options with how they preserve and accumulate it.
We are also proud to diversify our business model from our core spot and derivatives exchange to launching new products to cater to the demand in the DeFi area.
To that end, OKEx has released a C2C trading feature at OKEx, we launched OKChain, the most decentralized public chain out of all the exchanges, and we are proud to be one of the first validators on Ethereum’s Topaz testnet, the testnet for ETH 2.0, with OKPool.
The move to ETH 2.0 will undoubtedly propel DeFi to even higher heights, and the achievements of other protocols such as Maker DAO and Compound are also gaining enormous traction, which is why we have listed them for trading on our exchange. We are seeing the rise in demand for DeFi tokens and are proud to provide our traders with the opportunity to invest in the high-quality projects they ask for.
DeFi Is Good for Bitcoin
Of course, with so much expectation (and perhaps just a little too much hype) surrounding DeFi right now, there’s always the possibility of a price correction in the near future. Just like the ICO mania, DeFi is making a lot of noise and, when that happens, prices typically become inflated, which could lead to a bursting bubble.
There are still many obstacles in DeFi’s path including scalability, regulation, and interoperability. The technology is still learning to walk while we’re forcing it to run. A bursting bubble may be inevitable in the short term, yet that won’t hinder the long-term progress of the industry. And it would actually be good for Bitcoin.
Since the majority of altcoins (including DeFi tokens) trade against ETH or BTC and not the U.S. dollar, when traders want to cash out, they need to acquire one of these cryptocurrencies first.
If DeFi tokens continue to make real strides, that will mean more liquidity and strong capital inflows for Bitcoin. So even if DeFi undergoes a sharp correction, we remain extremely optimistic about its future and believe that its growth will be good for BTC, bubble or no bubble.