A former Wall Street bond trader at Citi and the head of research at TradeBlock, John Todaro, has revealed he believes the decentralized finance (DeFi) space and Ethereum are “going mainstream.”
In a tweet published in response to ZeroHedge pointing out Chainlink’s price performance as more and more traders start paying attention to DeFi, Todaro shared research conducted by TradeBlock on the impact DeFi has on ether’s supply and demand.
Todaro’s comments come at a time in which the decentralized finance space has been growing at a record pace. Data from DefiPulse shows that there are now over $4.7 billion locked in it, with the $1 billion mark being surpassed in early June of this year. A year ago, there were less than $500 million locked in the DeFi space.
The DeFi space started growing rapidly after one of the lending protocols in it, Compound, started distributing its COMP governance tokens to users. The tokens are distributed to users who interact with the platform, which led to a yield farming trend as users were lending and borrowing funds to earn more tokens and increase their yield through them.
TradeBlock’s researchers, in the post that Todaro shared, pointed out that since 2019 users generally use Ethereum on decentralized finance platforms as collateral, which means they use ETH to access DeFi services. The researchers wrote:
Year-over-year, the average monthly growth rate in net new ETH added across DeFi platforms stood at ~17%… Over the last year, more than 125,000 ETH, on average, were added across DeFi platforms each month.
If the growth rate has remained stable, millions of dollars worth of Ethereum are set to enter decentralized platforms per month. By the fourth quarter of this year, the researchers predicted, demand for ether could exceed newly minted tokens.
The document reads that researchers’ “conservative projections demonstrate that in November 2020, the demand for ether, just from DeFi services, could outstrip new supply.” The researchers note that other decentralized applications, including games, medial dapps, and others, could “result in further demand for ether.”
On the other hand, TradeBlock’s researchers noted that if the supply of ether is “not reduce as considerable as expected in the future,” the excess ETH tokens in circulation would significantly outstrip demand for DeFi and other decentralized applications.
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