The world of cryptocurrencies has been growing rapidly over the past few years, and with it has come a slew of new innovations in the industry. One of the most significant innovations in recent times has been the development of decentralized finance, or DeFi for short. DeFi is a new financial system built on blockchain technology that aims to replace traditional finance with a more transparent and decentralized model. In recent times, more and more crypto traders have been flocking to DeFi, and in this article, we will explore why.
First, it’s essential to understand what DeFi is and how it differs from traditional finance. In traditional finance, most financial transactions are centralized and controlled by large financial institutions such as banks. These institutions act as intermediaries between individuals or companies looking to conduct financial transactions, and they earn revenue by charging fees for their services.
DeFi, on the other hand, is a new financial system that is built on blockchain technology, which means it is decentralized and operates on a peer-to-peer basis. Instead of relying on intermediaries, DeFi platforms use smart contracts to automate financial transactions. These smart contracts are self-executing and enforceable agreements between parties, and they eliminate the need for intermediaries, reducing costs and increasing efficiency.
DeFi offers several advantages over traditional finance, and one of the most significant is its transparency. Unlike traditional finance, where financial transactions are often opaque and difficult to understand, DeFi transactions are transparent and publicly visible on the blockchain. This transparency is essential for building trust and ensuring that financial transactions are conducted in a fair and ethical manner.
Another significant advantage of DeFi is its accessibility. Traditional finance is often restricted to individuals with significant wealth, access to credit, and a good credit history. DeFi, on the other hand, is open to anyone with an internet connection, and it provides access to financial services to individuals who may have been excluded from the traditional financial system.
DeFi also offers a range of financial services, including lending, borrowing, trading, and insurance, among others. These services are often provided by decentralized platforms, which operate without the need for intermediaries, reducing costs and increasing efficiency.
So why are more and more crypto traders flocking to DeFi? One of the most significant reasons is the potential for high returns. DeFi platforms often offer much higher interest rates than traditional banks, which makes them an attractive option for crypto traders looking to earn passive income on their investments. For example, some DeFi lending platforms offer interest rates of up to 20% or more on crypto deposits. These rates are much higher than those offered by traditional banks, which typically offer interest rates of less than 1%.
Another significant advantage of DeFi for crypto traders is its flexibility. Unlike traditional finance, which often requires significant amounts of paperwork and bureaucracy to access financial services, DeFi platforms are often open to anyone with an internet connection and a cryptocurrency wallet.
This flexibility also means that DeFi platforms are available 24/7, which allows crypto traders to access financial services at any time, from anywhere in the world. This is particularly useful for traders who operate in different time zones and need to access financial services outside of traditional banking hours.
DeFi platforms also offer more control over financial transactions. Unlike traditional finance, where financial transactions are often controlled by intermediaries, DeFi platforms allow individuals to control their finances directly. This means that individuals can manage their investments, access financial services, and control their financial data without the need for intermediaries.
The decentralized nature of DeFi also means that it is less vulnerable to systemic risks. In traditional finance, large financial institutions can pose significant risks to the broader financial system, as we saw during the 2008 financial crisis. In DeFi, however, financial services are provided by decentralized platforms, which are less vulnerable to systemic risks
One of the primary reasons that crypto traders are flocking to DeFi is the potential for higher returns. DeFi platforms offer a range of financial services, including lending, borrowing, and trading, which can yield much higher returns than traditional savings accounts or investment vehicles. For example, some DeFi lending platforms offer annualized interest rates of up to 10%, which is significantly higher than the interest rates offered by traditional banks.
Another significant advantage of DeFi for crypto traders is its low fees. Traditional finance is often associated with high fees, including transaction fees, withdrawal fees, and account maintenance fees. DeFi, on the other hand, operates on a decentralized network, and its platforms are often open-source and community-driven, which means that fees are often much lower than those associated with traditional finance.
Additionally, DeFi platforms offer a high level of security. Transactions on DeFi platforms are recorded on a blockchain, which means that they are tamper-proof and immutable. This ensures that financial transactions are conducted in a secure and transparent manner, which is essential for building trust and confidence in the system.
DeFi also offers greater privacy than traditional finance. In traditional finance, financial transactions are often subject to government regulations, and financial institutions are required to collect and store personal information on their customers. DeFi, on the other hand, is built on a decentralized network, which means that transactions are pseudonymous and do not require personal information.
Furthermore, DeFi platforms are often community-driven, which means that they are more responsive to the needs of their users. This community-driven approach allows DeFi platforms to adapt quickly to changing market conditions and user needs, which is essential in a rapidly evolving market such as cryptocurrencies.
DeFi also offers greater decentralization, which is essential for building a more transparent and equitable financial system. Traditional finance is often associated with centralized power structures, which can be subject to corruption and abuse. DeFi, on the other hand, is built on a decentralized network, which means that financial services are provided by a community of users rather than a centralized authority.This decentralization allows DeFi to operate in a more democratic and equitable manner, which is particularly important for individuals who have been excluded from traditional finance due to factors such as geographic location, socioeconomic status, or political instability.
Finally, DeFi is still a relatively new and innovative space, which means that there are significant opportunities for innovation and growth. As the DeFi ecosystem continues to evolve, new opportunities for financial services and investment strategies are likely to emerge, which will attract more crypto traders to the space.
In conclusion, the rise of DeFi is transforming the world of finance, and more and more crypto traders are flocking to these platforms for the numerous benefits they offer, including higher returns, greater flexibility, lower fees, greater privacy, and decentralization. While the DeFi ecosystem is still in its early stages, the potential for innovation and growth is significant, and it is likely that DeFi will play an increasingly important role in the future of finance. For crypto traders looking to explore this new frontier, DeFi offers numerous opportunities for investment and financial growth, and it is an exciting time to be part of this rapidly evolving ecosystem.
GMX Trading Volume Increases
Following the demise of FTX, cryptocurrency dealers are moving to DeFi. The decentralized futures trading platform GMX has grown in prominence in recent weeks, thanks in part to a lack of confidence in controlled platforms. Instead of assuming control of users’ assets, the DeFi protocol enables trustless leveraged trading via smart contracts.
According to Dune statistics, trading activity on GMX has reached a new daily record of $1.17 billion in the last week.The number of everyday users has also grown considerably, reaching its highest level since June. Because of the increased selling traffic, GMX is now competing with many established centralized exchanges. For example, in the last 24 hours, the Kraken market in the United States has processed $737 million in transactions. According to CoinGecko statistics, centralized futures market Bybit has seen just over $800 million in volume.
The administration token of the GMX system has responded favorably to the increased usage. Since the market collapse on November 10, it has risen by more than 67%. Despite the present crypto market weakness, GMX is only 28% off its all-time peak of $62.10 set in January. Meanwhile, Bitcoin is down 75% from its high.
GMX’s earnings have increased in tandem with the increase in users and transaction traffic. The protocol has averaged $1.04 million in daily income over the last seven days, according to Crypto Fees statistics. It is presently the third most profitable cryptocurrency initiative, trailing only Ethereum and Uniswap.
With up to 30 times leverage, GMX customers can initiate long or short positions on Bitcoin, Ethereum, Chainlink, and Uniswap. Liquidity suppliers, who make trading and liquidation fees from dealers, collateralize positions. Arbitrum and Avalanche, two Ethereum Layer 2 networks, host the protocol.
GMX is one of many decentralized trading systems that have grown in prominence since the demise of FTX. Gains Network, a Polygon-based decentralized leveraged trading network, has also seen an increase in everyday users and trading volumes. GNS, the Gains Network cryptocurrency, has since increased by 50% from its weekly bottom.
The FTX collapse has once again emphasized the risk of entrusting crypto assets to controlled organizations. Given the choice, it appears that many traders are shifting to decentralized alternatives, especially as concerns circulate in crypto circles that other centralized platforms, such as Crypto.com and Gate.io, may also be experiencing liquidity problems. Only time will tell if autonomous trading will be successful in the long term. However, for the time being, systems such as GMX are in the spotlight.