What is the future of DeFi in 2024? What do key industry figures say?

Author: Robert D. Knight, Cointelegraph; Compiler: Songxue, Golden Finance

For decentralized finance (DeFi), last year may have been a quieter year than most. But that could all change soon. The next year looks set to be a landmark period for DeFi as crypto winter melts away and some trends reach their natural point of maturity.

This article interviews multiple experts from across the industry to discuss the prospects for decentralized finance in 2024.

At present, the entire industry is doing well. Optimism is everywhere as the green shoots of new growth begin to appear. Julian Deschler, co-founder of Web3 privacy protocol Elusiv, is one of the leaders bullish on DeFi’s near-term prospects.

“We look forward to a resurgence of constructive growth in the DeFi ecosystem. Projects that have been able to run smoothly and continue to deliver over the past few years are a sign of demonstrating true value and scalability. We believe these projects will be the best candidates for 2024 will spark legitimate traction in DeFi and lay the foundation for long-term mainstream adoption” Deschler noted.

Kain Warwick, founder of Synthetix, a derivatives market ecosystem, echoed this sentiment. Warwick said2024 “will also mark the end of the bear market. We have seen impressive price momentum in the last quarter and expect this to continue as macro liquidity unfreezes throughout the year. This is here to stay."

Deschler and Warwick, along with Sam MacPherson, co-founder of Phoenix Labs and contributor to MakerDAO's subDAO Spark, are looking forward to a great year. According to his analysis, there is strong evidence that abull trend is emerging.

MacPherson noted, “Having looked at Maker’s balance sheet for five years, I haven’t seen leverage like this since 2021. I think the bull market will start soon—certainly It’s in 2024.”

Regulation and Transparency

Regulation may be an area where profound change is possible. In 2023, the crypto industry often found itself at odds with U.S. lawmakers keen to impose themselves on the crypto industry. DeFi is unlikely to escape scrutiny in the coming year.

Nathan Catania, a partner at XReg Consulting, a public policy and regulatory affairs consulting firm specializing in cryptocurrencies, pointed out that true DeFi is far more cause for concern than centralized alternatives.

Catania explained:“Most DeFi projects have some element of centralized control and are actually hybrid finance (HyFi), meaning they are somewhere between CeFi [centralized finance] and between DeFi. ”“True DeFi will continue to be outside the scope of regulation through 2024 because it cannot be regulated under the existing regulatory paradigm. However, this year, including the United States, Regulators in many jurisdictions will crack down on HyFi."

Aleph Zero (Privacy Enhancement Layer 1) co-founder Antoni Zolciak also believes that2024 will be a big year for regulation .

“DeFi readiness comes into focus as institutional capital signals entry into the cryptocurrency market through ETF [exchange-traded fund] discussions, asset tokenization, and major Web3 launches Focus. The key market trends for DeFi in 2024 will focus on solving institutional issues and promoting compatibility with regulatory frameworks. The industry recognizes the challenges posed by features such as permissionless markets and pseudonyms, prompting the adoption of proactive compliance measures Making a critical shift toward a delicate balance between privacy and transparency."

Zolciack added in an interview: "The focus on transparency and compliance is reshaping the trajectory of DeFi... Addressing institutions Key solutions to the problem have emerged. On-chain intellectual property protection, real-time AML [anti-money laundering] analytics and decentralized order book exchanges mark a step towards protecting proprietary trading strategies."

Tokenization of everything

Some industry observers say one of the big trends in 2024 will be tokenization. From new yield-generating stablecoins to the tokenization of real-world assets (RWA), the industry has huge potential for growth.

Monerium co-founder and CEO Sveinn Valfells said that anything that can be put on the chain will be on the chain in 2024, and on-chain fiat currencies will be just one example of this larger trend.

“There is a growing recognition that fiat currencies play an integral role in traditional asset transactions and blockchain integration,” Valfells noted.

“That’s why on-chain fiat currencies, a fully authorized and regulated subset of stablecoins, are expected to gain momentum in 2024 and beyond. This is driven in large part by [RWA] excitement and Its potential to revolutionize the industry is driven by on-chain P2P payments. To capitalize on this trend, there will be greater interest in solutions that can seamlessly integrate with traditional payment systems, allowing it to be used in off-chain bank accounts Direct transfer between important cornerstone.

Valfells isn’t the only voice predicting big things about tokenization. Keyrock co-founder and CEO Kevin de Patoul has also set his sights on the industry.

As the digital market maker’s boss noted, “Tokenized Treasuries will continue to play a vital role in 2024, serving as a bridge between TradFi and DeFi […] However, The major market trend in DeFi in 2024 will be the tokenization of all assets. While tokenizing Treasury bonds is a starting point, other real-world assets such as stocks, bonds, real estate, and carbon credits will also undergo tokenization. This shift is expected to enhance liquidity, reduce transaction costs, and provide new opportunities for DeFi protocol design."

"Another important trend is the yield-generating technology backed by tokenized Treasury bills. The potential development of stablecoins. As stablecoins already play a vital role in the DeFi ecosystem, incorporating yield features backed by real-world assets may attract more conservative investors, which in turn helps Increasing liquidity, accessibility and innovation in the decentralized finance space.”

Tokenization will power DeFi< /h2>

Danny Chong of yield-enhancing asset tracker Tranchess said that tokenization will power much of the DeFi space by 2024, with some areas achieving 10x growth. Chong is among those in the industry predicting its importance in the year ahead.

“The tokenization wave of 2023 not only proves the versatility of blockchain, but also makes it a powerful force in bridging the gap between traditional finance and decentralized finance, bringing more Great accessibility and mobility,” Chong noted.

“The tokenization of real-world assets and the development of advanced structured products are two key trends that are likely to drive market maturity in 2024 […] Currently, the market is witnessing a shift towards liquid staking tokens. Coin (LST). This shift extends beyond cryptocurrencies to the tokenization of real-world assets, broadening the scope of what can be used as collateral."

Warwick also predicts decentralization The decentralized stablecoin market will grow further:“The rise of decentralized, crypto-native stablecoins will be a notable trend in 2024. The introduction of projects like Ethena, leveraging underlying transactions to scale, It will be a huge shift. 2024. I expect this to continue throughout the year and we will see more decentralized stablecoin projects enter the market."

Internet bond company Ethena Labs Conor Ryder, head of research and data, goes further. Ryder believes that yield-generating stablecoins will be a must-see trend this year. "The focus is expected to shift significantly to yield-generating stablecoins," he said in an interview. "We estimate that yield-generating stablecoins are the fastest-growing DeFi segment, expanding from about $1 billion to over $10 billion," he said in an interview. And these stablecoins will further proliferate. Their revenue is expected to come from staked Ethereum-based and RWA-based stablecoins, thereby enhancing their market influence."

Vega Protocol DEX ’s David Siska said that tokenization only now has a chance to shine thanks to the progress made by the crypto ecosystem during the crypto bear market.

“Tokenizing real-world assets is complex from a legal and regulatory perspective, but we now have the block capacity and technology (like L2 and Rollups on Ethereum) To achieve this. In the last market cycle, we were not ready for RWA. But today, the macro environment is different; the technology is obviously better; and there is much more capital on the chain." Siska pointed out.

“My prediction is that RWA will first have an impact on derivatives trading, as perpetual contracts and futures markets can reference RWA from various oracle providers. For example, the likes of Pyth, Redstone, and Chainlink ’s oracles all provide a variety of RWA price information,” Siska said, adding,“To truly mature and move beyond price speculation, DeFi must interact with the real economy. A financial system that is not connected to the real economy has virtually no connection with it. Meaningless."

Other main points

The development of Layer 2 is another important phenomenon since 2023 and will reach maturity in 2024 .  Linera CEO Mathieu Baudet predicts thatnovel solutions will emerge to address Layer 2 challenges.

Baudet noted: “While 2023 was the year of betting on Layer 2, 2024 will be the year of consolidation, especially for protocols that are heavily based on DeFi "As an industry, we are beginning to realize that communicating across Layer 2 is difficult and leads to fragmented liquidity. Layer 2 will need to work together to achieve faster communication - possibly by sharing a decentralized orderer Instead of using slow Layer1 transactions."

On the other hand, Sung Min Cho, CEO and co-founder of Web3 messaging company Beoble, expects Web3 social platforms to also shine in 2024. Cho noted, “As we move into 2024, I expect Web3 social platforms will continue to grow and evolve in 2024. The ecosystem […] From an industry perspective, clearer regulation, growing consumer demand and The development of innovative technologies will make the Web3 social platform an area worthy of attention in the industry."