On-chain liquidity lead to exponential growth for the DeFi sector, and it could send it to $1 trillion sooner than you think argues 0xJimmyYin.
. Looking back, DeFi’s expansion can be defined in three eras, each representing another significant development in removing barriers to liquidity and making the markets more attractive and efficient to participants.DeFi protocols existed prior to 2020, but they suffered somewhat from a “chicken and egg” problem when it came to liquidity. Theoretically, someone could provide liquidity to a lending or swap pool.
Curve also introduced innovations like its vote-escrowed tokenomic model, which incentivizes liquidity providers to lock up funds for the long term to further increase the reliability of liquidity and reduce slippage. There are several examples of decentralized exchanges using central limit order books emerging already — Serum, built on Solana, Dexalot on Avalanche and Polkadex on Polkadot, to give several examples. The existence of order book exchanges is likely to make it easier to onboard institutional and professional investors, as they allow limit orders, making for a more familiar trading experience.
On the other side, Sam Bankman-Fried is flying the flag for bringing the financial system on-chain. In March, he spoke at the Futures Industry Association in Florida, proposing to U.S. regulators that risk management in financial markets could be automated using practices developed for the crypto markets.
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