TVL, or Total Locked Value, is a useful indicator for assessing the overall health of the DeFi market. At the time of writing, over $87 billion in crypto assets had been deposited across all DeFi protocols according to Defillama. Even though they peaked at $256 billion, we think DeFi is here to stay (the same was said for cryptocurrencies a few years ago).
Traditional banks will not be dislodged
DeFi will stay, but that doesn’t mean banks will become obsolete. They remain important and can rely on decentralized finance thanks to the maturation of DeFi solutions.
There is huge potential for banks to support their customers or connect them to DAO communities, giving them access to trusted financial services that are led by communities around the world.
It will be fascinating to watch where and how innovation happens, as DeFi is still in its infancy. DeFi protocols can provide loans at very attractive rates. Banks that can utilize the capabilities and functionality of DeFi protocols will be able to provide their customers with tempting offers.
On DeFi platforms, banks can lend their own capital or that of their customers while earning interest and mitigating credit risk. But it may take some time for banks to get comfortable with the technology and see how their customers are using it.
By then, DeFi will have to sort out its security issues, more $1 billion was stolen from DeFi protocols in just over a year according to Chainalysis. This does not encourage banks to get serious.
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