During the market crisis in March 2020 and May 2021, DeFi proved to be resilient

As if 2020 did not provide enough exciting moments, 2021 is becoming a rather interesting year for cryptocurrencies. With the price of Bitcoin (Bitcoin) Wandering around the $35,000 mark, skeptics and authority figures flocked to the streets of social media to celebrate the long-awaited decentralized economy’s demise. Of course, they easily forget that the price of Bitcoin has risen by 533% since the last century. The third halving occurred in May 2020.

Given the number of people claiming that the cryptocurrency bubble has burst – including Former U.S. President Donald Trump — It’s almost hard to remember that the price of Bitcoin is hovering between $9,000 and $10,000 Only 12 months ago.

In fact, since the halving, decentralized finance (DeFi) has become the most promising area in the cryptocurrency economy, driving the adoption of the crypto sector. A quick glance at the growth statistics can clearly show how much momentum DeFi has generated in the past year. In June 2020, the total lock-up value (TVL) of DeFi is approximately US$1.05 billion. Today, DeFi Brag More than $104 billion in lock-up agreements.

related: Is 2020 the “DeFi year” and what is the expectation for the industry in 2021?Expert answers

Although DeFi will lead the encryption field into the mainstream, the core of DeFi has been challenged in the past two years.Although some onlookers may Point out obstacles In March 2020 and May 2021, the fact remains that DeFi is highly resilient and is expected to grow further.

Calm in the storm

Despite the rapid growth of DeFi, the field has undergone two major stress tests in the past two years: March 2020 and May 2021. What needs to be clear is that these examples challenge the DeFi field in unprecedented ways.Spread Global COVID-19 pandemic with Elon Musk’s fault Panic selling, plus Cracking down on China’s Bitcoin miners, And finally at Lose $1 trillion in the entire crypto market.

If Musk’s Twitter account is partly responsible for summoning the storm, then DeFi provides a peaceful presence in the storm.

After Musk triggered a massive panic selling, something more convincing and impressive happened: there was nothing. The DeFi protocol continues to operate exactly as designed: no crashes, no malfunctions. In fact, the value of the DeFi department will grow to more than $100 billion-passing the stress test with excellent results.

This feat is particularly impressive when tied to the stress test conducted in March 2020. The total capital of the DeFi sector dropped sharply-below $1 billion.To make matters worse, the enthusiasm reached a climax Crisis in the MakerDAO liquidation system, The agreement became under-capitalized, and Ether (Ethereum) Free bids and purchases within 40 minutes.

However, like other areas in the DeFi field, MakerDAO survived. Although its survival requires it to auction local MKR tokens to fill up bad debts, it can also survive the “Black Thursday” storm in March 2020.

Only 12 months later, DeFi will once again assume the mission of accelerating the encryption space.Even the famous mainstream investor Mark Cuban will continue claim With DeFi, the “utility” of cryptocurrencies has changed. There are so many things you can do now. If I have my Bitcoin, no matter whether its value rises or falls, I can draw a certain percentage from it, borrow and lend and earn income, becoming my own private banker. “

CEX and DEX performance

The impact of the above two crises is also very different in centralized and decentralized exchanges (DEX). Although DEX responded to this situation relatively effectively, their centralized opponents experienced disruptions and severe liquidation chaos.

The May 2021 crisis was extremely difficult for the Centralized Exchange (CEX), which cleared more than $7 billion in futures positions in a single day, which was the second highest single-day clearing in history. In addition, CEX users encountered functional issues, including the inability to add collateral, close loans, or complete transactions.

related: Decentralization and Centralization: Where is the future?Expert answers

On the other hand, decentralized exchanges can not only avoid interruptions or downtime, but also DEXs experienced According to Dune Analytics data, unprecedented transaction volume. Nevertheless, this is not to say that there are no hiccups along the way. In two days, the DeFi agreement liquidated a record 700 million U.S. dollars, and users suffered staggering natural gas prices. However, these protocols operate as designed and do not cause complicated problems for users at any time.

Compared with centralized platforms, this alone highlights the robustness of DeFi.

DeFi is the new user safe asset fund

Perhaps the most important factor in DeFi’s flexibility is the ability of cryptocurrency traders to generate significant returns on tokens, regardless of market fluctuations. DeFi protocols have become more and more popular in the past year as they reward traders with collateral and agricultural proceeds. More broadly, High-yield agriculture helps traders maximize returns Borrow, lend, and pledge their encrypted assets across different DeFi protocols. The transaction technology is very similar to the dividend payment in the traditional banking system, and the income paid to traders helps them generate compound returns.

related: Yield agriculture is a fashion, but DeFi is expected to change the way we interact with money

This method helps DeFi weather the storms of 2020 and 2021, as traders continue to operate within the DeFi protocol to earn an annual rate of return (APY) while avoiding market turmoil.

The volatility we have witnessed over the past 18 months has largely failed to discourage traders from investing in DeFi. In fact, statistics are just the opposite.Although some speculators are preparing for the crypto winter, the DeFi protocol experienced Monthly revenue hit a record high-pushing the TLV in the DeFi agreement to nearly 8 billion U.S. dollars.

Large-scale economic stress tests in 2020 and 2021 have the potential to disrupt previous iterations of the decentralized economy. However, this evolved and mature version of the cryptosphere is more resistant to storms. Similar to the influential Logan Paul against lightweight champion Floyd Mayweather, simply surviving is a huge victory. Moreover, similar to Paul, the performance in the DeFi field is much better than most people think.

The DeFi protocol not only survived, but also thrived. The volatility in the free market must not become the takeaway of the first two years. More convincingly, DeFi passed these tests—tests that are difficult for centralized protocols to handle.

The flexibility of DeFi alone is enough to illustrate its potential and endurance.

This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.

The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.