What a year 2020 has been for the crypto world. Most of the major cryptocurrencies, barring a few, achieved all-time-high prices. It includes the likes of Bitcoin and Ethereum. But there's one segment of the crypto world that made the most out of 2020. Yes, we are talking about decentralized finance, popularly referred to as DeFi.

The growth of DeFi in 2020 was such that many call 2020 to be the year of DeFi. Let's have a look at some of the statistics that depict how DeFi made its presence felt in the world of cryptocurrencies. The DeFi sector is quantified in terms of the total amount of value locked in all DeFi protocols. This figure is known as Total Value Locked or TVL.

In February, the TVL of DeFi space stood at $1 billion. As of now, the total value locked of DeFi protocols stands at over $19 billion. That is almost 20X growth over 11 months. Such a drastic increase in the TVL proves that 2020 was the year of DeFi. Now, the question that arises is - How will 2021 prove to be for DeFi? Experts believe that 2021 will prove to be a year that catapulted DeFi to new heights. In this article, we will talk about what 2021 has in the store for DeFi.

Cross-Chain Technology Will End the Scalability Woes for DeFi

Ethereum is an integral part of DeFi. The explosive growth of DeFi led to a problematic situation for DeFi users. It led to an increase in transaction fees. At the same time, the average transaction time started increasing considerably.

Ethereum was already suffering from scalability issues even before the astounding rise of DeFi. But the scalability woes of Ethereum exacerbated even further as the number of DeFi users and transactions arose rapidly in 2020.

There's a ray of hope for DeFi space in 2021 as experts believe that cross-chain technology will finally solve the scalability problems of DeFi. Cross-chain technology will distribute the burden of DeFi equally among different blockchains. The likes of Matic, Cosmos, Polkadot, among many others, are working actively on cross-chain technology.

DeFi Derivatives & Insurance Protocols Will Grow at a Faster Pace

The DeFi insurance sub-sector was one of the hottest parts of DeFi in 2020. It will continue its momentum in 2021 as well. Players such as Nexus Mutual, CDx, among many others, are already making a name for themselves in the DeFi insurance space. In 2021, they will see even higher growth.

The entry of big brands such as Facebook, Inc. FB and PayPal Holdings, Inc. PYPL has made the crypto world even more popular. The mainstream popularity of cryptocurrencies gave new leverage to DeFi insurance protocols. They will bring new products to eat away the market share of mainstream insurance companies. Improved and better DeFi insurance products will ease the process of buying financial products further for the masses in 2021.

DeFi Ecosystem and Token Launchpads - An Important Factor in Success of DeFi Insurance in 2021

A new breed of DeFi insurance players will enter the market in 2021. What are the reasons entrepreneurs lining up to launch DeFi insurance products? Well, it has become easier for tech-savvy entrepreneurs to launch their DeFi insurance protocols as DeFi Ecosystem and Token Launchpads such as Emerge DeFi have simplified the process of launching a successful DeFi insurance product. The question which comes up now is - How do such platforms help entrepreneurs launch successful DeFi insurance products?

Let's take the example of Emerge DeFi. They have made it easy for DeFi insurance protocols to audit DeFi insurance protocols, run KYC and background checks before onboarding users, and conduct a successful token sale. They also assist the DeFi insurance company in marketing and public relations. It means that launching a successful DeFi insurance product is not as complicated as it used to be in the past. Hence, we will see a flurry of new DeFi insurance protocols entering the market in 2021.

Proof of Stake Takes the Center Stage in DeFi

Staking became very popular in 2020, and we believe that staking will be an integral part of DeFi in 2021. The impact of staking has been such that many new players will enter the market in 2021 with staking products & services to capitalize on the huge demand.

Polkadot is a leading name in staking space and it has over $3 billion staked. Ethereum 2.0 has already crossed the figure of $2 billion staked, which translates to 2.2 million ETH. It is very likely that many top chains will adopt staking in varying degrees in 2021.

Conclusion

2021 has lots of exciting stuff for DeFi and DeFi enthusiasts. Do you believe that 2020 was a fantabulous year for DeFi? Then tighten your seat belt and brace yourself for an exciting journey ahead, as DeFi will achieve a lot more in 2021.