DeFi is undoubtedly the biggest buzzword in cryptocurrency right now, fueled by the success of projects including Maker’s DAI stablecoin, Compound’s lending protocol, and robo-adviser yEarn Finance. However, one thing that each of these protocols has in common is a heavy dependence on Ethereum.
Kava was one of the first projects to recognize the potential for DeFi to extend beyond its Ethereum roots. As such, it received early backing from Binance, launching its token sale on the exchange giant’s prestigious Launchpad IEO platform in late 2019.
Since then, Kava has gone on to launch its first stablecoin USDX, backed by Binance’s BNB coin, along with Harvest, a yield-generating DeFi platform for Bitcoin and other non-Ethereum assets. The fourth version of the platform, due to launch imminently, will usher in expanded cross-chain functionality with support for other assets, including XRP, LINK, and Binance’s BUSD stablecoin.
Having founded Kava in 2017, Brian Kerr, co-founder and CEO, has shown an uncanny prescience for predicting the rapid growth of DeFi. Therefore, it was a pleasure to have the opportunity to gain some of his insights into which trends we can expect from the cryptocurrency sector in the coming year.
1. Brian, what is the biggest trend to look out for right now and will it continue as the predominant trend in 2021?
Right now, the most significant trend is the flood of institutional and retail capital into stablecoins and the DeFi sector. I think DeFi will be the dominant trend throughout the next year or two.
The trend has naturally resulted in significant growth of the Ethereum ecosystem. But that same success is also causing the industry to realize that Ethereum can’t be the home for DeFi in the long run, and so, the search for the next generation of first-layer blockchains has begun. In 2021, we’ll see developers searching for greener pastures, particularly for blockchains that can provide infrastructure and security for DeFi applications without the congestion or limitations of Ethereum.
2. What other evolutions in DeFi may be likely in 2021?
Another significant trend to look out for in DeFi is its integration in centralized venues. Kava and Compound have been embraced by platforms such as Binance, opening up DeFi’s user base from early technical adopters to a far broader audience of retail traders and investors. If other major retail trading venues follow in Binance’s footsteps, the DeFi sector could expand to become ten times the size it is today.
3. What do you think will be the five biggest trends by the end of 2021, and how will these compare with the top five at the end of this year?
Today’s top trends are DeFi, stablecoins, cross-chain products, integrating DeFi products with centralized finance (CeFi), and crypto-backed derivatives.
By the end of 2021, I expect DeFi as a general topic to move beyond its initial hype phase. However, we can still expect to see growth in specific areas – in particular, cross-chain products, DeFi and CeFi integrations, and derivatives platforms. I also think a major new development for 2021 will be DeFi integrations into more traditional financial institutions.
In the US, banks have recently been given the green light to offer cryptocurrency custody services, so now it’s just a matter of time before they put the necessary infrastructure in place to do so. Therefore, bank accounts featuring USD stablecoins and attractive savings rates as alternatives or complements to cash accounts will soon emerge.