Blockchain technology opens up many possibilities, from the business world to the healthcare industry. But the year 2020 saw a boom in the use of this technology for DeFi (or decentralized finance). Sector’s figures reflect this movement. While the total blocked value in this market was US$ 662 million in early January, it exceeded US$12 billion in November, according to DeFi Pulse.
There is no central management in this type of cryptoassets, as in a common bank, for example. So the users themselves make the decisions through governance tokens, which have become a highly valued asset.
DeFi attracts investors because it offers the possibility of a high return, although it also poses risks. Generally, the higher gain is the result of greater leverage of investments.
With more exposure to different types of assets, the chances of profiting increases, but also those of loss. Therefore, caution is needed when investing in this type of asset, not least because failures can occur as it is a novelty in the crypto world.
DeFi token hits record price that was bitcoin’s
Because there is no central management, the users themselves make the decisions in the DeFi protocols. To do this, they need to have a governance token from that protocol. These tokens have also become a tool for speculation. Whoever buys the asset early on can sell it for a higher value when that protocol picks up traction. Compound’s token, for example, became the leader in the DeFi rankings in 2020 with just one day of trading.
In some cases, they have displaced not only the market’s favorite altcoins but also bitcoin itself. It was the case of the Yearn.finance token (the YFI), which value reached US$ 38 thousand, breaking a record that once belonged to the leading cryptocurrency. After adjustments, the price fell to less than half of that figure, but is close to that of the bitcoin.