The decentralized finance sector is one of the most interesting ecosystems in the blockchain industry as it offers many novel financial instruments and approaches that have never existed before. While decentralization technologies can be successfully applied to a wide range of industries including logistics, supply chains, and manufacturing, the DeFi sector seems to be the biggest and most promising of ways to put blockchain technology to good use.
The growth of the DeFi sector is more than impressive. DeFiLLama tracks over 13 thousand different active protocols that demonstrate on-chain activity in at least some capacity. There is some overlap across different categories and the number does not account for DeFi protocols that are deployed on obscure chains that are not tracked by aggregators. The number is still very large. With rates of survival in the industry being very low, many startups have already failed. For example, Cavern Protocol on Terra had decent user activity before the collapse of the network’s native token but had to be abandoned by the developer due to low adoption rates.
If you try searching for one of such services on your own, you will quickly find out that the term does not have a definition set in stone with many different platforms calling their distinctly different products very similarly. Let’s talk about the ways in which this particular term can be interpreted:
While the vast majority of clients in this sector of the blockchain industry are either established corporations seeking new ways to improve their product lineups or crypto enthusiasts hoping to launch a new successful startup, there is more than enough room for daring investors who may be interested in utilizing capital by focusing on personalized Dapps or launching new protocols instead of investing in an existing one.
It is true that blockchain technology is not as complicated as many outsiders think it is. Early concepts were suggested back at the beginning of the 1990s but nobody was yet interested and the number of internet users was insufficient to create a strong demand for a technology focused on data distribution and governance decentralization. After the 2008 financial crisis, many tech geeks saw the potential of blockchain to completely revolutionize the world of finance.
The development is not overly complicated due to several factors:
The yield farming segment of the DeFi sector is quite massive with over 500 different protocols offering pools with rewards in native, layer-2, and other types of tokens. The combined TVL of the segment is just over $5.8 billion as of September 2024, a slight year-to-year improvement. These numbers are dwarfed by the ATH of $29 billion achieved in 2022. Nevertheless, it is still a growing ecosystem that has millions of monthly active users and robust TVL numbers suggesting a high level of investor interest.
When building a new Dapp that operates in this particular segment, several important factors must be accounted for:
One of the biggest reasons why many startups fail is the inadequacies in the initial design of smart contracts leading to a wide range of issues from interrupted transactions to critical exploits. Since many startups have just one shot at capturing their place in the DeFi sector, the importance of excellent smart contract design must not be underestimated. In fact, all available resources should be thrown at this particular part of the development process as other problems can be sorted out later on.
Putting the importance of audits and security in DeFi projects on the top of the list of priorities is crucial for the long-term survival of your project.
Here are the benefits of using some common techniques:
Contemporary investors and startup founders have plentiful options as such services are offered by an incredibly large number of contractors from individual freelancers to massive corporations. Selecting a good provider of services can be a challenge even for someone with rich experience in the DeFi sector.
We want to discuss several important factors that determine the quality of services. Use some of the techniques mentioned below to identify companies that may deliver an excellent consumer experience and build you a functional decentralized application that will help you make money!
Focusing on social metrics when trying to find a good contractor is a good idea. Since we are living in the age of widely accessible internet, doing research is not as hard as two decades ago. You can find all the necessary information online by surfing the web or talking to active members of relevant communities on social networks like Reddit, Discord, Facebook, and Telegram.
Below are two important criteria that you should pay extra attention to:
A provider must have a large enough team to work on multiple projects simultaneously with many of them designed for specific blockchains. In many cases, it is a good idea to work with specialized development teams that have experience working with specific chains that you want to target. While Solidity seems like a relatively simple language that can be picked up by any developer, the Ethereum ecosystem has some unique quirks that developers who are unfamiliar with the network will spend way more time figuring out.
The same can be said about any other blockchain network. Polygon, Base, Solana, Binance Smart Chain, and many others have unique technological challenges and standards.
The data on user activity in the DeFi sector is unreliable with different sources reporting figures that have massive discrepancies. For example, the on-chain analytics application on Dune says that the number of active wallet addresses in the ecosystem has risen to 86 million which is a 230% increase year-on-year. The number of monthly active wallets has grown to 16 million with an even higher 316% growth.
At the same time, Statista claims that the number of actual users has gone down throughout the last three years after peaking at 8 million in 2022. TVL figures also suggest an overall decline. However, the shift in TVL compositions indicates that the industry is maturing with many accidental users leaving. For instance, many protocols have seen a sharp decline in stablecoin holdings and a rise in ETH holdings.
The number of DeFi protocols is also growing steadily. While many tracked platforms do not have any monthly activity, the majority of them do. With just the category of DEXes and yield farming projects containing over 2,000 different protocols, it is easy to see why so many investors and financial institutions are interested in making their move and joining the sector.
There are many unique platforms that have emerged thanks to the existence of Dapp development teams that offer their services to corporate and individual clients. We want to give you a glimpse at the world of protocols designed by established providers:
Whether you want to launch a personalized Dapp to invest in the sector directly and offer such opportunities to other users or find a solution for a business, the current landscape of the blockchain industry has you covered. Investors must remember one of the main risks when dealing with DeFi solutions: insufficient or inadequate security measures. If you find a responsible developer, deploying a useful Dapp won’t be a problem!
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