Delphi Digital Shares Crucial Insights That Will Influence the Future of DeFi in 2024

A consulting entity focused on blockchain and cryptocurrencies Delphi Digital released an insightful report named 'The Year Ahead for DeFi 2024,' which sheds light on the key trends expected in the DeFi ecosystem. decentralized finance (DeFi) sector for the upcoming year.

The previous year has been relatively quiet for DeFi, marked by a tumultuous global environment, while the surge of bankruptcies among centralized players in mid-2022 led to a significant capital exit from on-chain finance.

Conversely, the current year has showcased a remarkable rebound in this sector, with numerous tokens experiencing impressive rallies, many exceeding 100%, while only a handful of tokens faced declines throughout the year.

Looking ahead to 2024, there are five key trends in DeFi that are essential to monitor:

Liquid Staking

The current staking rate of Ethereum Ethereum (ETH) accounts for 23.7% of the overall supply of 120.2 million ETH. The volume of staked ETH is nearing the target of 33.5 million ETH, which represents 27% of the total Ethereum supply—a benchmark that is considered optimal for maintaining strong network security.

There has been notable growth in the adoption of Liquid Staking Derivatives (LSDs), with around 44% of all staked ETH now allocated across various platforms such as Lido, Coinbase, Rocketpool, Binance, and Frax Finance.

Throughout 2023, Frax Finance Staked ETH witnessed a steady rise from 38,000 to an impressive 233,000. Frax Finance distinguishes itself with its innovative sfrxETH design and seamless integration within its ecosystem, especially in Fraxlend.

Meanwhile, Mantle Additionally, the protocol has utilized its ETH holdings to launch the mETH initiative, aimed at generating yields for Mantle while enhancing liquidity on decentralized exchanges (DEXs).

Decentralized Exchanges

Decentralized Exchanges Unlike traditional centralized exchanges, Decentralized Exchanges (DEXes) operate on blockchain networks, facilitating peer-to-peer trading without intermediaries.

Several pivotal projects are set to shape 2024, including Uniswap v4, Uniswap X, and other intention-based DEXs. Among the noteworthy DEXs to watch for developments in 2024 are RageeTrade, IntentX, Orderbook Protocol, Uniswap, Cow DAO, 1inch Network, and SYMMIO.

Despite significant developments, perpetual DEXs in 2023 did not manage to capture a larger market share. DYDX v4 transitioned to the Cosmos app chain, Aevo took the lead with OP stack development, Vertex protocol enhanced DEX user experience, and RabbitX came to prominence as a booster for Starkware.

App-specific rollups

Application-Specific Rollups (ASRs) have emerged as a noteworthy innovation in the blockchain realm, providing a customized response to scalability issues. These rollups process and aggregate transactions off-chain before transmitting them to the Ethereum main network, thereby improving efficiency, lowering congestion, and alleviating gas fees.

Aevo has set a precedent by forking Optimism to roll out rollapps and has introduced a new DEX designed to widen its capacity for increased usage. It's anticipated that in 2024, most DEXs, especially those focused on derivatives, will establish their own execution environments to gain competitive advantages.

Promising projects primed for attention in 2024 include Aevo, noted for its relatively decentralized matching procedure, Vertex Lyrafinance, Caldera and various tools aimed at streamlining the deployment of rollups. Furthermore, systems like Astira and Espresso hold significant potential in this space.

Real-World Assets

The sector of Real-World Assets (RWAs) has surfaced as one of the standout segments in the 2023 cryptocurrency market. As crypto prices fluctuated downwards and global interest rates increased, investor focus has shifted toward traditional off-chain yields, such as U.S. Treasurys, creating a pivot away from crypto-native avenues like yield farming. Concurrently, the conversation around tokenization has garnered substantial interest from both established figures in the crypto world and external stakeholders, including institutional investors and regulatory bodies.

In 2024, endeavors surrounding tokenization projects such as Backed and Superstate are expected to gain substantial traction.

Decentralized stablecoins

The global stablecoin market underwent an unparalleled transformation in 2023, influencing the trajectory of digital currencies. This year brought about a crucial shift in both technological advancements and innovative practices. regulatory landscape that governs these digital assets.

Decentralized stablecoins maintain a correlation with specific asset classes, employing protocols and mathematical models to ensure their price stability and mitigate volatility, setting them apart from their centralized counterparts. Nonetheless, decentralized stablecoins represent just a fraction of the total stablecoin market capitalization.

The derivatives market is maturing as a prominent area with significant untapped potential, with decentralized stablecoins like synthetic USD from Synthetix expected to make notable impacts in 2024.

As the cryptocurrency environment adapts, the year 2024 is set to be an exhilarating journey for DeFi. The outlook for the year suggests ongoing evolution, driven by technological progress, shifting market dynamics, and the ceaseless quest for creativity within the decentralized financial landscape.