Binance Research: DeFi has become one of the most important areas on Ethereum

Binance Research, a research institution under the Binance cryptocurrency exchange, released its latest report on January 8, focusing on the ecosystem of Decentralized Finance (DeFi).

This report highlights how Ethereum, decentralized exchanges (DEX), and competitive coins are shaping the future of DeFi.

The Growing Importance of DeFi for Ethereum

Since Satoshi Nakamoto introduced Bitcoin and distributed ledger technology (DLT) to the public 11 years ago, the revolutionary blockchain technology has continued to attract various industries globally, from logistics and payment systems to decentralized finance (DeFi).

Since 2019, DeFi has become one of the key growth areas for Ethereum, with the number of active projects nearly doubling last year. The research team pointed out:

DeFi has become one of the most important areas for Ethereum, with over 100 projects and teams building applications and protocols in 2019.

Nevertheless, the number of DeFi users on Ethereum remains relatively low, with over 40,000 users on average per month, 90% of whom come from decentralized exchanges (DEX).

According to reports, the Ethereum DeFi ecosystem attracts between 40,000 and 60,000 unique users per month, with decentralized exchanges accounting for 34,244 users, while only 4,649 users use financial applications like lending platforms.

The Binance research team expects that by 2020, the Ethereum ecosystem will further develop based on the foundation laid last year, including the introduction of more Ethereum-based derivative products, solutions for under-collateralized loans, and other significant advancements.

USDC Challenging DAI's Dominance

The report indicates that while MakerDAO's decentralized stablecoin SAI/DAI continues to dominate the DeFi space, Circle's US dollar stablecoin (USDC) experienced continuous growth in this field in 2019.

The circulation gap between USDC and DAI gradually widened in 2019, partly due to DAI's limitation of a 100 million supply cap. The USDC supply increased from 2.613 billion to 5.185 billion in 2019, a growth of 98.4%.

It is worth noting that the decentralized exchange Kyber Network saw rapid growth in trading volume in 2019, with locked assets increasing from $1 million at the beginning of the year to $3.4 million by the end of the year.

The report concludes that the rapid development of DeFi has created a vibrant and creative global community, laying the groundwork to challenge traditional financial platforms. While most use cases are currently limited to the existing crypto community, decentralized finance is poised for rapid growth once technical and legal challenges are addressed.

Related Reading

• 2019 Dapp Industry Review: Ethereum Users Grow by 118%
• Bitcoin to Become the Major Asset Locked in DeFi, Interpreting the Five Major Predictions for the DeFi Market in 2020

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