According to a study from Chainalysis, the United States of America is leading the global race on DeFi adoption. As per the survey, the United States has an index score of 1, while Vietnam, Thailand, the United Kingdom, China, and India are close behind. China holds the fourth position in the overall index ranking and has an index score of 0.62. The top position being held by the US does not come as a surprise, though. In the past couple of years, the US economy has witnessed the transition towards DeFi-friendly practices and standalone product/service launches.
However, the relatively higher performance from Thailand, Vietnam, the UK, and China cannot be ignored either. The transition from high and medium-income countries indicates that investors in these regions are looking at Decentralized Finance as the future of investment and money movement. The study from Chainalysis also noticed that the popularity of DeFi platforms in Eastern Europe, Eastern Asia, Central and Southern Asia, and Africa has skyrocketed in the past year, especially after July 2020. On the other hand, the US has witnessed a steady growth of DeFi spaces for the past few years.
Diversifying Crypto-asset Investments
Although experts have different opinions while explaining the high adoption rates of DeFi platforms and services, they all agree that cryptocurrency investors want to diversify their portfolios to the fullest. At this point, the potential offered by DeFi platforms is endless, providing fixed and non-fixed income options to customers. In the United States market, investors seem to have shown increasing interest in services and products that use blockchain technology, smart contracts, and other DeFi-related actions. It is also worth noting that many countries with high adoption rates have plans to give institutional approval for DeFi-based solutions and crypto-assets.
A deeper look at the matter exposes a few unexplored aspects, though. For instance, David Gogel, the Growth Lead at a popular DeFi protocol named dYdX, says that DeFi space today is attracting people who are already active in the crypto space. That is, the high adoption rate is accounted for by people who have already invested in blockchain-based assets but want to expand their wealth into a service-focused space. It also indicates that the number of people getting started with decentralized apps or DApps in each country could differ. The study also clarifies that even the countries with mainstream cryptocurrency market presence are yet to join the DeFi space in full swing.
A Potential DeFi Disruption
DeFi platforms use blockchain, smart contract, and other cryptography-based techniques to offer various financial services, including but not limited to trading, savings, derivatives, and conventional lending-borrowing. It remains to be seen whether the increasing adoption rates of DeFi services can pilot the disruption, especially considering that many governments are yet to give a clean chit to blockchain-based technologies, citing the potential security/privacy reasons.