DeFi powered by experienced and strong investors: Global DeFi Adoption report

NEW DELHI: Chainalysis’s recent Global DeFi Adoption Index 2021 report suggested that Decentralised Finance or DeFi adoption is strongest in high-income countries that already had substantial cryptocurrency usage, specially among traders and institutional investors.


DeFi Index is designed to highlight grassroots adoption by individuals, rather than those sending the largest raw value of funds.

For the uninitiated, DeFi or Decentralized Finance refers to a class of decentralized cryptocurrency platforms that can run autonomously without the support of a central company or group.

DeFi platforms are built on top of smart contract enriched blockchain - primarily

Ethereum

network - and fulfill specific financial roles based on the underlying code of smart contract.

The US has topped the list, followed by Vietnam, Thailand, China and the UK. India has been ranked 6th in the DeFi adoption index. Middle to high income countries with established crypto markets and strong institutional and professional markets have ranked very high.

Just like cryptocurrency adoption index, the DeFi adoption index takes the geometric mean of the ranking of 154 countries based on three metrics and normalises the final number on a scale of 0 to 1.

The final number is then used to give each country a score that determines the overall rankings. The three component metrics used for this index are on chain cryptocurrency value received by DeFi platforms weighed by purchasing power parity (PPP) per capita, total retail value received by retail platforms, and individual deposits to DeFi platforms.

The inputs from David Gogel, Growth Lead at decentralized exchange dydx were sought by Chainalysis to analyse the growth pattern of DeFi. Gogel said that large scale traders, operating at professional level of cryptocurrency hedge funds, have been the biggest DeFi adopters so far.

He said right now DeFi is for crypto insiders who have been in crypto trading for some time, and have enough funds to experiment with new assets. He cited the US, China, Russia, and several other Western European countries having high cryptocurrency adoption to be the key growth markets of DeFi presently.

Based on the DeFi index report and Gogel’s observation, the glaring distinctions between DeFi ecosystem and larger cryptocurrency index have been highlighted.

At the grassroots level, emerging markets are dominant in cryptocurrency adoption for want of future savings, remittances. DeFi adoption has been driven by experienced cryptocurrency traders and investors looking for new sources of assets in innovative platforms.