Decentralized finance (DeFi) is a natural product made possible by blockchain technology and has the right and ready infrastructure to propel the technology to a bigger playing field. The space has grown by leaps and bounds since the Ethereum network went live in July 2015, with Ethereum network transactions growing by 33x to 1.2 million per day currently, and blockchain transactions would exceed millions per day if other chains were included.
Most of these transactions originated from the DeFi services such as Uniswap, which facilitates over $1 billion swaps each day, as well as lending and borrowing protocols such as Aave, Compound and BondAppetit, with tens of billions in market size. While these are large numbers by any standard, it is only a decimal point of the trillion-dollar traditional finance (TradFi) industry.
DeFi is only scratching the surface of the TradFi services
The traditional financial system entails enabling exchanges of goods and services, including the stock market, debt market, derivative market, commodities market, payment, etc. This is facilitated by service providers — banks, insurance companies, stock exchanges, financial intermediaries, custodians, etc. — who collect trillion dollars of fees from the services provided.
Mainstream DeFi services currently include lending, borrowing, decentralized trading and yield-aggregating — a relatively short list as compared to the wide-ranging financial services offered in TradFi. This will not remain the status quo as the DeFi developers are actively exploring and building more services to the ecosystem. Protocols that find the right product/market fit will see explosive growth, e.g., the recent rise of dYdX.
The trillion-dollar TradFi market is ripe for disruption
Consumer banking. The global retail banking revenue is estimated at $2.3 trillion across multiple consumer finance products, including loan/lending, mortgage product, payment, etc. Specifically, consumer payments and transactions gross over $500 billion annual revenue to banks globally and could be tapped with a frictionless UI, a global stablecoin and broad acceptance points — the ambition of Facebook’s Diem before the regulatory pushback.
Capital market. Global equity market capitalization is estimated at over $100 trillion, compared to only over $243 billion total value locked (TVL) in decentralized finance. Security tokens are an inevitable trend that regulators will eventually need to approve and construct the regulatory framework, and centralized and decentralized exchanges that adhere to the know-your-customer (KYC) requirement can tap into this trillion-dollar equity market in TradFi.
Insurance. The global insurance industry is another trillion-dollar TradFi industry that can be perfected with smart contract technology. About one-third of the global insurance premium is allocated for administrative and commission costs, which is essentially short-changing the consumer. Smart contracts enable the cheap, fast and accurate implementation of the insurance processes from underwriting to claims, and will be a lucrative source of revenue for the DeFi industry.
DeFi’s addressable market size
Transaction volume. Ethereum network processes over 1.3 million transactions each day in 2021, encompassing remittance, trading, lending, borrowing and various other types of transactions. This is a tiny number as compared to over 1 billion daily global credit card transactions, and the around 5.5 billion daily trading volume in NASDAQ. Capturing 1% of the credit card transactions on the Ethereum chain is at least 8x-ing its current volume.
Protocol revenue. The annualized protocol revenue in all DeFi protocols is estimated at $5 billion. This, again, is a fraction against the $2.3 trillion global retail banking revenue; $2 trillion global cross-border payment revenue and $35 billion global stock exchange revenue. The TradFi industry is so lucrative that seizing a 1% market share means 10x-ing the DeFi revenue.
Crypto crackdown accelerates DeFi trend. Even though countries like China continue to crack down on crypto, it will only accelerate the use of DeFi. Active Ethereum wallet and browser extension MetaMask users have 10x-ed to 10 million in August 2021. While this is a seemingly high number, it represents only a 5% penetration rate amongst the 221 million global crypto users. This shows that the general crypto users, who are used to frictionless centralized services such as Robinhood, are a massive untapped market for DeFi and can be captured as the UI/UX is improved.
DeFi is only three years old with services that became mainstream for the crypto community in the 2021 DeFi summer. Lending platforms, such as Compound and Aave, together with decentralized exchanges such as Uniswap and Curve, cemented their positions as the market-leading protocols with the first-mover advantage. These didn’t come easy. Uniswap’s founder Hayden Adams wrote an article detailing his journey towards the launch of Uniswap V1 — it is a culmination of faith, friendship, support and hard work during the crypto winter. The DeFi builder community has grown stronger in this new cycle with more programmers from the traditional startups and big tech joining the blockchain and DeFi scene, and this can only mean we have more resources than ever to grow the space and technology.
On February 4, 2004, a dorm room project was born and became a $1 trillion company with 3 billion users in 2021 — it is called Facebook, or Meta after rebranding. DeFi has just started, and with the resources and talent flowing into the space now, growing 100x in the next 5 years is not a dream, it is inevitable.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Artem Tolkachev is the founder and CEO of BondAppetit and an investor in DeFiHelper. Since 2011, he has been an intellectual property and information technology lawyer and entrepreneur. In 2016, Artem founded and headed Deloitte CIS Blockchain Lab. As part of that initiative, he led a range of innovative projects involving the implementation of enterprise blockchain solutions, tokenization of real-world assets, tax and legal structuring of security token offerings, and the development of cryptocurrency and blockchain legislation.
Starbucks Launches Beta of Web3 ‘Odyssey’ Loyalty Program
The popular coffee chain opened up the Web3 extension to its Starbucks Rewards program to a “small group of waitlist members,” including employees and customers, allowing them to engage in interactive “Journeys” that earn “Journey Stamps” in the form of Polygon-based NFTs. In addition, users also get “Odyssey Points” that will open access to new benefits and experiences in the future, including virtual espresso martini-making classes, exclusive events and trips to Starbucks roasteries and coffee farms.
Sam Bankman-Fried misses deadline to respond to testimony request, now what?
Crypto’s public enemy number one, Sam Bankman-Fried has missed a crucial deadline to confirm his appearance at an upcoming Senate Committee hearing.
The former FTX CEO missed a Thursday 5pm ET on Dec. 8, deadline for responding to a Senate Banking Committee request that he testify at the Committee meeting on Dec. 14. This has set up the possibility of a congressional subpoena.
On Dec. 8, the Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, Sherrod Brown, and ranking member of the Committee Senator Pat Toomey released a statement on the request.
“FTX’s collapse has caused real financial harm to consumers, and effects have spilled over into other parts of the crypto industry. The American people need answers about Sam Bankman-Fried’s misconduct at FTX,” they stated before adding:
“The Committee has requested that he testify at our upcoming hearing on FTX’s collapse, and will consider further action if he does not comply.”
According to the official Committee website, the hearing titled “Crypto Crash: Why the FTX Bubble Burst and the Harm to Consumers” will be webcast on Dec. 14.
So far, two witnesses have been confirmed to attend the hearing — including American University Washington College of Law Professor Hilary J. Allen, and, Actor and Author Ben McKenzie Schenkkan.
Professor Allen is an academic whose research focuses on the impact of new financial technologies on the stability of the financial system. Ben McKenzie is an anti-crypto actor-turned-commentator who played a troubled teenager on a U.S. television series called “The O.C.”
Messari founder Ryan Selkis commented on the futility of the witness selection:
The Senate Banking FTX hearing is a complete goat rodeo and mockery of the system.
I offered to go even though it would have been a distraction, but instead the Senate opted for the former child star of the OC and a “never crypto” academic.
Another waste of taxpayer $$$.
— Ryan Selkis (@twobitidiot) December 9, 2022
Meanwhile, Cointelegraph has reached out to Ben McKenzie for comment.
Related: Texas enforcers want Sam Bankman-Fried to attend the hearing in February
Other than the Dec. 14 Senate Banking Committee hearing, Bankman-Fried has also been requested to attend a separate hearing called “Investigating the Collapse of FTX” on Dec. 13 with the U.S. House Financial Services Committee.
Bankman-Fried was first requested to attend the hearing via a Twitter post from Congresswoman Maxine Waters, but seemingly declined the invitation on Dec. 5 stating that he wasn’t sure what would happen by the hearing date, “but when it does, I will testify.”
Waters responded on Dec. 8 stating “a subpoena is definitely on the table” should Bankman-Fried fail to voluntarily testify at the hearing.
The collapse of SBF’s FTX empire has initiated a tsunami of backlash from U.S. lawmakers and regulators threatening to drown the fledgling crypto asset industry.
Binance CEO ‘CZ’ Will Teach You About Crypto And The Web3 on MasterClass
On December 8, Binance, the world’s largest cryptocurrency exchange, announced its partnership with Master Class, an online education platform, to launch a course on cryptocurrencies and blockchain for the “crypto-curious” audience. The class will be led by Binance’s CEO and founder, Changpeng Zhao (CZ), and is a joint effort between both entities to build a better ecosystem —and prevent new users from losing their money.
The master class, called “Crypto and the Blockchain,” will last for 3 hours and 40 minutes and will provide participants with the opportunity to learn about blockchain technology, Web3, DeFi, DAOs, and more from leading experts in both the crypto and mainstream finance industries. These experts include Changpeng Zhao (CZ), Emilie Choi, President and COO of Coinbase, Chris Dixon, Founder and Managing Partner of a16z Crypto, and Paul Krugman, author, NYT columnist, and Nobel Prize-winning economist.
Crypto and Blockchain 101 —But Experts Are Welcomed
The master class will cover essential topics on cryptocurrencies that will give newcomers a balanced view of the ecosystem and help them understand the industry’s current state and where it is headed. However, more experienced individuals can also benefit from the class and find valuable insights in each lesson.
Each participant will also have access to a downloadable crypto primer packed with explainers, activities, and illustrations to help them better understand the topics covered in the class.
To join the class, participants must pay a MasterClass membership fee of $15 per month (billed annually) that unlocks access to multiple courses and sessions taught by more than 180 instructors, so users will benefit from a wide spectrum of courses that go beyond the scope of crypto and the Web3, ranging from modeling to gardening with everything in between.
Binance Bets on Education To Improve The Crypto Scene
Changpeng Zhao said that as civilization advances, it is necessary to understand new technologies in order to build business models that would be impossible using the outdated traditional financial system. On the announcement, he said there are new business models that can be built using the novel blockchain technology, which cannot be built using the methods and tools from the legacy financial system.
In addition to the master class, Binance has also announced the launch of six courses and 29 modules through Binance Academy to teach basic knowledge about cryptocurrencies and blockchain. Upon completing the six free courses, users will receive an NFT certificate as proof of learning.
Binance also launched new courses and quizzes on December 7 to allow users to earn rewards in BNB, BUSD, POLYX, and ALGO as Christmas gifts.
Binance Free $100 (Exclusive): Use this link to register and receive $100 free and 10% off fees on Binance Futures first month (terms).
PrimeXBT Special Offer: Use this link to register & enter POTATO50 code to receive up to $7,000 on your deposits.
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