Since the beginning of the year, the amounts stored in blockchain-based financial products have increased by more than 2,000%. For only a few tens of thousands of users.
One record can hide another. As Bitcoin flirts with its highs, decentralized funding is exploding. This decentralized finance concept, nicknamed DeFi, refers to blockchain-based financial products. These are in fact sets of smart contracts, contracts that are automatically executed under predefined conditions that store cryptocurrencies, mostly ethers. According to the specialized DeFi Pulse site, these contracts include more than 6.7 million ethers and 164,400 bitcoins, which is equivalent to $ 14.7 billion (as of December 3, 2020). Since the beginning of the year, the number of ethers stored has increased by 148% (+ 10,000% Bitcoins) and the total amount of the dollar has increased by 2,140%.
So can we talk about a bubble? Definitely this is the feeling of Vitalik Buterin, co-founder of the Ethereum blockchain, who said in a tweet last June: = & gt; “Honestly, I think we’re focusing on flashy DeFi that has way too many high interest rates. Interest rates significantly higher than what can be undercut Traditional financing is inherently either a temporary arbitrage opportunity or an unreported risk. « According to the specialist DeFi Rate, the rates on some platforms were over 50% in November 2020, for example. Far from those of traditional finance.
For Manuel Valente, director of analysis and research at Crypto Broker Coinhouse, this is a bubble caused in part by the governance tokens connected to the platforms that enable voting for decisions. « As soon as the platforms started to distribute the tokens, they increased in value and the evaluation of the protocols began to increase enormously, » analyzes Manuel Valente. « It is clear that there is a fad. Some stocks have grown rapidly like speculative bubbles. However, this is not comparable to the crypto bubble that we experienced in 2017, » said Owen Simonin on his part. , also known as Hasheur on Youtube.
« Some stocks have grown rapidly like speculative bubbles. However, this does not compare to the 2017 crypto bubble. »
At the end of 2017, the price of crypto exploded, accompanied by a madness about ICOs, fundraising campaigns in crypto currencies … which fell after a few months. « For an ICO you could create a whitepaper of around twenty pages with a nice website. There you have to have a real platform that works with intelligent contracts, a minimum of code … » emphasizes Manuel Valente. « We cannot put DeFi in the same basket as ICOs, » says Alexandre Stachtchenko, co-founder of the Blockchain Partner. « Many DeFi products have fundamental value because they allow you to touch interest rates, conduct financial flows and make investments, » he adds. Invest, but also speculate.
Too modular a sector
« Today most DeFi users are casino gamers, » said Arnaud Salomon, founder of Mt. Pélerin, a Swiss company that specializes in asset tokenization. Casino players that are very few in the world. Almost a million DeFi addresses have been created to date, according to specialized website Dune Analytics, but a user can have multiple addresses. According to our surveyed experts, there are only a few tens of thousands of active users of DeFi products and services worldwide. No wonder, because the technology and concepts are very complex.
DeFi is certainly based on products that work, but are closely or remotely linked to the DAI. This stablecoin from the MakerDAO crypto loan protocol is used in most DeFi platforms. « This is the cornerstone of the challenge. When it fires, everything fires, » summarizes Jonathan Herscovici, founder of StackinSat, a bitcoin platform. « The great strength of DeFi is also its great weakness: its modularity. You borrow a service that secures another, that pledges another, and so on, » explains Alexandre Stashchenko. And it often starts with the DAI. Should an error occur on this stable coin, the DeFi will probably no longer be worth much. « MakerDAO has shown that it is robust, but it’s not a project that has been around for 10 years, there can still be bugs, » notes Alexandre Stachtchenko.
« The DAI stable coin is the cornerstone of the Defi. If it freaks out, everything freaks out. »
Unlike Bitcoin, the vast majority of decentralized financial platforms are actually … not decentralized. There is always a part of the chain that is centralized. And therefore who can be hacked. For a few weeks now, the hacks have multiplied. Example in November 2020 with the Value DeFi platform exempted from 5.4 million… DAI (5.4 million dollars). Hacks aside, scams often appear during bubbles too. Even if, according to our specialists, there is nothing to report on this page. « I haven’t seen any scams like we’ve seen for ICOs. I’ve certainly seen bad projects, but not scams, » assures Alexander Stashchenko. « Many protocols have forked (another blockchain made from the same code, editor’s note) to offer an alternative by specifying names of fruits or vegetables. The vast majority today are no longer developed. In any case, the exhibition investors and unsuspecting traders were very limited, « notes Pierre Laurent, co-founder of blockchain company Atka.
A « real » bubble will come
However, the lack of a hack or scam didn’t prevent that little bladder from starting to empty. Since the beginning of November, the number of ethers included in DeFi has fallen from 8.9 million to 6.6 million or 26% less. As the price of ether rose sharply during the month, the total amount of funds stored in decentralized funds rose from $ 11.35 billion to $ 14.06 billion (+ 24%). « If the capital formation is so fast, there have to be corrections, » said Arnaud Salomon. « There was a shift between September and October when Bitcoin came back to the fore, » says Manuel Valente. Is this the end of the DeFI bubble? « There will likely be a real bubble when the products are exposed to more mainstream investors, » predicts Gabriel Rebibo, co-founder of Atka. « It could happen next year. »
How does Coinbase Wallet work?
This wallet can be downloaded on the mobile phone. At the moment, this enables ethers, classic ethers and ERC-20 tokens to be saved and managed. Support for Bitcoin, Bitcoin Cash and Litecoin is planned for the coming months.
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Coinomi is the perfect wallet for beginners: it is a free mobile application, available on both Android and iPhone, offering an intuitive user experience without complexity. It is compatible with more than a hundred blockchains and their corresponding assets.
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- Move your money to Coinbase Pro.
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With the Wallet app, you can keep your debit or credit cards, prepaid cards, business cards, boarding passes, cinema tickets, vouchers, loyalty cards and travel cards in one place. Student and others.
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* Actual depositing currencies into your Coinbase account is free. Coinbase then charges a commission of 1.49% per purchase. For lower fees you can use GDAX.
What does Kraken cost?
The fees for Kraken are relatively low compared to market prices. On average, the transaction fees are between 0.15% and 0.25% and vary mainly depending on the transaction volume. Withdrawal and deposit fees vary by currency.
What are the fees for Binance?
Fees are charged for trading activities on Binance. The flat rate for trades is 0.1% of the trade amount. Using the BNB token for trading activities results in a 50% discount so the fee is 0.05%.
What are the eToro fees?
For example, eToro’s custody fee for stocks is $ 22 per day to buy and 12 cents per day to sell. And don’t forget that the retention fee is added to the amount borrowed. If you have $ 1000 and you made a trade at $ 3000, you borrowed $ 2000.
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