DEFI

Citigroup's latest report comments on the advantages and challenges of decentralized finance, unexpectedly boosting DeFi coins?

share
Citigroup

Citi GPS, a research report under the Citigroup group in the United States, released a study this month titled "Future of Money," which delves into next-generation digital currencies such as CBDCs, Diem, cryptocurrencies, and stablecoins.

Citigroup's View on DeFi

In a report, Citigroup researchers highlighted the current applications of Decentralized Finance (DeFi).

A key indicator of the increasing adoption of DeFi is the Total Value Locked (TVL) in DeFi. In November 2020, the TVL of DeFi was around $12 billion, but four months later, it had grown fourfold to $45 billion, and the total market value of DeFi tokens also rose to $90 billion. Citigroup researchers stated:

"The increasing funds locked in DeFi signify growing confidence as users are willing to place money in smart contracts to interact with new financial instruments. At the same time, the total market value of tokens issued by DeFi projects is rapidly increasing, indicating significant investor expectations for the future potential of DeFi applications."

However, the report also pointed out that DeFi still faces many problems and challenges, such as complex underlying technology, poor user experience, low liquidity, technical risks (hacks), among others. Additionally, possibly due to DeFi being potential competitors to banking institutions, Citigroup researchers emphasized the advantages of traditional financial institutions compared to DeFi:

"It is worth mentioning that traditional financial service providers offer not only trust but also have spent years (even decades) understanding complex market dynamics and knowing how to adjust under market pressures. DeFi projects have not yet established this institutional experience, making them not only susceptible to unexpected technical issues but also unable to predict market developments."

Community Response

Interestingly, Messari researcher Mira Christanto tweeted that Citigroup cited several OG-level DeFi projects (including MakerDAO, Uniswap, Aave, Compound, UMA) that saw significant increases yesterday.

Uniswap founder Hayden Adams also referenced Mira Christanto's tweet, stating that DeFi didn't even exist three years ago but has now become an unstoppable concept, developing faster than Bitcoin, something Citigroup understands.