If DeFi Is a Gold Rush, What Stage Are We In?

FinanceFeeds Editorial Team

DeFi has been in an incredible explosion for the last several years.  While there have been ups and downs, the overall trajectory has been impressive. 

Photo by Rene Böhmer on Unsplash

Stories of investors becoming millionaires (and billionaires), and FOMO (fear of missing out) becoming almost a tangible force, it’s important to look at what has happened with some perspective.  We need to better understand just where we are on this roller coaster, and what is on the horizon.

Gold Rush Fever

Thankfully, maddening rides like this have already happened.  Oddly enough, the DeFi craze has many similarities to something very old-fashioned:  the gold rush.  Take for instance the 1848 San Francisco gold rush.  When word that gold had been found reached the ears of the eastern US, people came out in a wave of gold fever, with FOMO driving people to drop their entire lives and join the rush.  People completely unprepared to mine for gold saw that others were getting rich and were happy to risk everything for just a chance to strike big.  Some did indeed get rich, others lost everything, and there were probably a few who broke even.  Towns were built seemingly overnight, and were abandoned when the local area gold veins ran out.  The entire period in history was incredible, insane, and left winners and losers alike behind.

So what can that tell us about DeFi?  Are we in for a ghost town scenario?  

Post-Rush Growth

No one can see the future, but it seems that instead of being in the rush, we’ve actually passed it.  Why this might be alarming, it’s actually excellent news.  If you follow San Francisco past the ghost towns and the post-ferver attitude, what you find is the foundation for San Francisco as it exists today.  

While finding the literal gold had slowed, a different type of wealth was just beginning to be discovered.  Business giants like Levis built their foundation from the rush, but began their growth to an empire afterward.  Real estate boomed, and one of the iconic cities of the world was built.  While we don’t always make the connection, San Francisco’s wealth after the rush was exponentially more than during.  Think of the trillions of dollars in real estate value, the 100’s of billions in economic revenue, not to mention the culturally rich gifts the city has given to the world.  

Bringing the comparison back to DeFi, we find ourselves learning from the rush and building a foundation for the future; a DeFi 2.0.  What does this mean exactly?  It means that some of the biggest issues and challenges from the first wave of DeFi centered around a few key issues:  Compliance measures, a better UX for users, and a design for accountability (especially in the P2P markets).  Any one of these items could stifle or even destroy the industry.  Platforms see this, and are seizing the opportunity to build entire platforms around solving them. 

While the ecosystem of DeFi 1.0 accomplished a great deal, it was limited by the challenges mentioned above.  Platforms did the best they could, but without compliance you can’t have a global platform; without intuitive UX you can’t create mass adoption; and without accountability there is no trust for P2P.  Platforms needed to resolve this, and a number of them have created the tools necessary.  One of the leaders in this subindustry, tackling each of the issues, has been AllianceBlock.  They have a compliance-first focus, and have developed a finance engine for users that can embed the required KYC/AML metadata into an NFT, making it both compliant and liquid.  This alone creates a massive amount of new use cases for DeFi 2.0 platforms to use.  Their UX design, like some of the other DeFi innovators, has learned what works and what doesn’t, and creates an experience to simplify the complexity of DeFi for a larger pool of potential customers.  Finally, it has built a crowdfunding program called Fundrs, whereby Web3 projects can share their visions/plans and interested users can invest in the project, with a variety of potential rewards/returns.  The investment is also in the form of a compliant NFT, helping create the appeal of a liquid asset and the chance for a secondary market for those late to the (funding) party.

The Next Era

DeFi 2.0 will begin the first mass adoption growth of crypto, which is what the industry has been excited about for years.  There will be widespread finance, trading, investment; along with gaming, collecting (yes, even the cartoon NFTs), and social media experiences; the metaverse will transform from an experimental idea to a part of our daily lives; and the larger blockchain technology will embed itself into supply chains, manufacturing, fleet monitoring, engineering, court documentation, and even your pet’s medical records.  The sky is the limit, and for the first time in history a large part of the world is connected, and teams from around the globe will have the chance to make their mark in the history books.  The opportunity to create a truly unique, inclusive, and global ecosystem is exciting to imagine, and even more exciting to find a place in.   There is a lot of work to do now that the wild gold rush is subsiding, but we haven’t begun to uncover the true wealth of DeFi.

Read this next

Digital Assets

As SPAC bubble bursts, Circle terminates its $9 billion merger with Concord

USDC stablecoin issuer, Circle has terminated its planned $9 billion SPAC merger with publicly traded blank-check company Concord Acquisition Corp.

Institutional FX

Integral reports lowest FX volume in two years

Foreign exchange trading volumes dropped in November across Integral’s trading platforms as currency markets saw a relatively quiet period after consecutive months of strong trading activity.


CDEX: Avelacom announces connectivity to Cboe Europe Derivatives

“We anticipate that many of our customers from Asia will be particularly interested in getting exposure to pan-European products via just one venue, which CEDX offers.”

Retail FX

BUX acquires Spanish Ninety Nine’s retail brokerage unit

“Thanks to this acquisition, Ninety Nine users will have access to a wide range of services provided by BUX, such as investing in Spanish, European and US stocks, ETFs, cryptocurrencies, fractional investing and the BUX Savings Plan.”

Digital Assets

SEBA and HashKey partner to expand crypto in Hong Kong and Switzerland

SEBA Bank AG has announced a new strategic partnership with HashKey Digital Asset Group as part of both firm’s expansion efforts in Hong Kong SAR. 

Executive Moves

Broadridge appoints Martin Koopman as Chief Product Officer

“Martin has a proven record of driving product innovation both at Broadridge and at previous companies. His vision and proven ability to execute will be invaluable as we become the foremost SaaS provider to the financial services industry.”

Digital Assets

DAM rolls out Moonwalkers v1 testnet ahead of support for yield-generating collateral

“We want to champion innovation by making it easier to securely direct stablecoin liquidity away from Ethereum towards newer networks without the constant vulnerabilities posed by bridges. d20 will help accelerate the adoption flywheel of emerging networks, and this is our first step towards making our omnichain promise a reality.”

Institutional FX

FIA EXPO: ICE’s Brian Norris talks ESG investment, carbon credits and market data

The FIA Futures & Options Expo, now in its 38th year, convened the listed derivatives dealers, thought industry leaders and other stakeholders for two days of networking.

Retail FX

Malaysia regulator exposes OctaFX clone, shady FB profiles

Malaysia’s financial regulator today warned online investors about the risks of following investment tips made on social-media platforms.