Big four audit firms are set to be a significant part of the Decentralized Finance (DeFi) ecosystem according to the latest blockchain industry report by German-based non-profit, dGen.
The DeFi space, which has seen tremendous capital gains in TVL, will grow even more prominent in the coming decade as per dGen insights on its report. Jake Stott, the co-founder of dGen, noted that support from other financial market stakeholders would be inevitable going forward. Tom Howard, Chief Strategy Officer at Mosendo, said;
‘Over time, traditional financial institutions will have no choice but to interact with decentralized finance tools, slowly disinter-mediating the industry from the inside out.’
Functions like verifying the authenticity of an invoice, tracking payment settlements, and insurance claims could occur faster with the help of a blockchain. Their role will be to act as an intermediary between DeFi and traditional finance.
Dubbed the ‘Decentralised Finance: Usecases & Risks for Mass Adoption‘ report, dGen paid particular attention to the DeFi space. Currently, over $2.5 billion in funds is locked within DeFi based products. It is an area that has been hailed as the future of markets given almost all traditional assets are finding their way onto Ethereum based protocols. Though still at its infancy stages, dGen acknowledged this underlying potential in DeFi stating that it,
“could leapfrog the current FinTech industry, providing a new structure of financial services.”
Consequently, this optimistic narrative has gained massive support from across financial services, tech, and the academia elite. DGen's researchers are bullish that the market could grow past the trillion-dollar mark by 2030. The report highlights that DeFi will: “Provide income for thousands of gamers, streamers, and influencers”
It will also be adopted by European financial institutions who will switch to offering “DeFi-enabled savings and pension accounts.”
A recent Q2 report by industry giant, ConsenSys, concurs on the possibility of a DeFi future given historical growth rates in the past three months. It goes on to detail that Bitcoin tokenization protocols and Yield farming frenzy are the fundamental factors behind this growth as per now.
While the DeFi space has emerged as an avenue to make better interest compared to zero percent in some jurisdictions, it continues to face security threats arising from the core infrastructures.
“Knowledge and security risks will continue to reduce, on top of a growing number of securities in the event of a hack. It appears the solutions the industry needs to scale will come from within the industry itself.”
The team is, however, optimistic the underlying issues might be resolved in as little as one year. Kain Warwick, Founder of Synthetix told dGen,
‘Insurance on DeFi is still extremely limited[…] DeFi still has significant tail risk, so insurance is likely to remain very costly in the short term, but as protocols mature, costs should come down[…] allowing for simpler and more useful insurance to emerge’.