Decentralized finance, or DeFi, is one of the most innovative aspects of blockchain and cryptocurrency today. It provides access to alternative financial products and services, proving beneficial to both the banked and unbanked people of the world. Several key trends will emerge throughout 2022 to make this space even more appealing.
DeFi Keeps Evolving
The concept of decentralized finance encompasses many products and services. These opportunities are akin to traditional financial services, such as borrowing, lending, interest-bearing vehicles, etc. However, they operate without involving third parties, ensuring users retain greater control over their funds. Additionally, DeFi provides some unique opportunities that wouldn’t be accessible otherwise.
As decentralized finance products and services reside across multiple networks, the overall industry grows. Today, this industry’s total value locked (TVL) sits above $250 billion. A year ago, that was just $47.26 billion, confirming the ongoing growth of this industry. Hundreds of protocols provide access to lending and borrowing services, yield farming, staking, bridging solutions, derivatives, synthetics, and much more.
Despite the growing variety of products and services, there is much room for progress and evolution. Developers and coding enthusiasts come up with exciting opportunities in decentralized finance. Several new trends and features will emerge throughout 2022. Every new addition marks another step toward mainstream adoption of these technologies.
Gaming Monetization Through GameFi and NFTs
One of the more prominent trends throughout 2022 will be the gamification of decentralized finance, or GameFi. The cross-over is visible in the many play-to-earn blockchain games residing on the market today. Various projects gamify concepts like yield farming, liquidity mining, and staking through in-game activities. That approach removes the learning curve associated with DeFi, yet still introduces users to potentially attractive rewards.
A secondary approach to GameFi is monetizing the gaming industry through NFTs. More specifically, players can own in-game assets as non-fungible tokens and trade or sell them. It is another crucial aspect of play-to-earn blockchain gaming, although these games may require an upfront investment. However, innovative concepts like rent-to-play – where existing NFT holders can rent their assets to new players and share the revenue they earn – remove that barrier to entry.
More Stablecoin-Focused Opportunities
No one can deny the importance of stablecoins in the cryptocurrency industry. These assets maintain a combined market cap of over $178 billion, which is rather significant. Moreover, assets like USDT, USDC, DAI, UST, and others play a growing role of importance in decentralized finance. Stablecoins are an excellent option to provide liquidity for decentralized exchanges and engage in liquidity mining.
Moreover, users rely on stablecoins to provide liquidity for lending, borrowing, and other services. They earn interest, which provides a stable passive revenue stream. Unlike volatile crypto-assets like Ether, Binance Coin, or MATIC, a stablecoin cannot deviate from its fiat currency peg. It is a low-risk revenue-generating opportunity that may not offer an insane APR but still provides better returns than money in a savings account.
Double Yield-Bearing Opportunities
Innovation is not hard to come by in the decentralized finance industry. Hubble, for example, introduces the concept of double yield-bearing opportunities. Through this method, users can take out a loan in the USDH stablecoin and invest it in other protocols to earn yield. Afterward, the user can repay the USDH loan and retain any yield they earned from the other DeFi protocol(s). As the focus on stablecoins intensifies in decentralized finance, there may be some exciting opportunities ahead.
However, Hubble goes one step further. The deposited collateral to take out a loan will also earn yield. Users can deposit “vanilla” SOL or yield-bearing collateral like mSOL or pSOL. Other deposit options, like BTC or ETH, will be delegated to partner lending platforms to generate yield on the user’s behalf. It is a unique approach to attracting liquidity for lending and borrowing purposes and gives users more revenue opportunities. More importantly, Hubble takes no cut of the yield users earn.
A third option to explore is using the borrowed USDH and depositing it to Hubble’s Stability Pool. That Pool serves as an “insurance policy” to ensure loans are repaid. Users who provide liquidity to this Pool earn near 10% difference from liquidated accounts. Additionally, all liquidity providers earn HBB rewards, which users can stake to earn rewards from the protocol. Hubble clearly prioritizes helping users make money through various means and keeping risks to a minimum while doing so.
The focus in decentralized finance shifts toward low-risk and passive revenue opportunities rather than high-risk speculation. It is up to individual protocols to provide users with the necessary tools to make money. Offering multiple revenue streams creates a prominent competitive advantage and paves the way for even more powerful DeFi products and services in the future.
Moreover, the role of stablecoins will become more outspoken. Any protocol issuing a stablecoin that is usable across other DeFi projects can gain significant momentum over the coming months. Additionally, supporting different types of collateral – preferably across multiple blockchains – and giving them yield-bearing capabilities by default can bring the mainstream into decentralized finance throughout 2022.