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Findora’s Charles Lu, Others Predict DeFi Market in 2020

As the year draws to an end, the branding of 2019 as the year of decentralized finance (or DeFi) seems to have paved the way for industry insiders to make projections on what the coming year would bring for the concept.

DeFi has become easily topical even though many are still grappling with understanding what the concept which Binance describes in its latest report as an ecosystem of financial applications built on top of blockchain networks really brings.

Consensys sees DeFi as a “shift from today’s closed financial system towards an open financial economy based on open protocols that are interoperable, programmable, and composable” that is providing the foundation for a new financial economy on the Ethereum platform. The firm, which builds blockchain developer tools on Ethereum, predicts “an explosion of synthetic assets and new derivatives” in 2020 thus creating millions and billions in value even as speculation thrives.

The arrival of interoperability in 2020 is also cited by Wave Financial’s Roy Learer in his prediction. He believes the stablecoin market cap will surpass $15 bln, that Bitcoin will beat Ethereum when introduced as collateral in DeFi, a 10x surge in non-custodial exchanges current “DEX” market share and that collateral ratios will remain above 100%.

For Alex Mashinsky, the founder of Celsius Network, he shares in an op-ed that cryptos and DeFi have what it takes to go mainstream in 2020 though he believes DeFi ptojects have some hurdles to cross to achieve this goal. They include the need for their interfaces to be easy to use, the products and services they create being of use to a greater share of the population and their need to be conscious of the fact that many people are still uncomfortable investing in digital currencies especially for the price volatility.

Charles Lu, the CEO of Findora adds that with the curtain drawing on this year, 2020 will see auditable privacy being a top focus for DeFi and open finance more broadly leading to wider adoption. He says:

“New breakthroughs in zero-knowledge proofs (ZKPs), such as Supersonic, will enable auditable privacy, allowing users and financial services to prove that they are compliant without revealing any further information. For instance, a fund manager operating an investment fund can prove to investors that it is only taking a 2% management fee, without revealing any information regarding its trades, investments, or investors’ identities.

“Further, blockchain-based financial services will take major steps forward, as an open, universal standard for digital identity and reputation/credit-worthiness begins to emerge. While adoption of DeFi increased in 2019, it is still mostly limited to speculators and crypto-enthusiasts. The primary reason for this is that most systems today fail to integrate user identity and reputation. By introducing financial passports, next-generation identity infrastructure will offer complete user data privacy via selective disclosure credentials. A solid foundation for identity will enable credit and reputation, expanding open finance and banking to real users worldwide.”

Lu notes in addition that 2020 will witness the next stage of enterprise adoption of blockchain technology with a renewed sense of enthusiasm around its deployment at enterprise level and with many high profile companies. He also thinks there will be a pivot towards “ensuring transparency, consumer protection, and regulatory compliance as adoption increases.”

DeFi models differ between China and US

While DeFi is expected to build financial services that are separate from the traditional financial and political system, it is unclear how its concept is going to interact with the planned introduction of digital currencies by some countries like China.

Many existing DeFi projects target the global market even as a study shows that the models applicable to the political and economical landscapes of the two most important countries differ. It leaves how working out a uniform structure to govern all may be contentious in the quest to achieve a more open financial system that is free from censorship and discrimination globally.

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