The hype around DeFi and NFT – An Analysis
“The emergence of the new financial era was so sudden that it took the world by storm. Bitcoin paved the path for the decentralized financial system and has come a long way in introducing the power of blockchain technology to the world. When the world was grasping the new concept of blockchain and cryptocurrency paradigm, the developers of the blockchain technology ignited the new world changing innovations in terms of DeFi and NFT”.
What are DeFi and NFT?
To understand the hype around DeFi and NFT’s, we must first understand the concept of DeFi and NFT.
Decentralized Finance (DeFi)
The Decentralized Finance (DeFi) under its umbrella provides various financial tools backed by the blockchain technology to execute financial transactions without the use and interference of a central governing body. It is the exact opposite of the centralized system of finance that includes our banking system. The DeFi technology has the capability of solving even the most complex use cases of finance.
Non-Fungible Tokens (NFT)
The Non-Fungible Tokens are the digital assets that can contain anything such as art, drawing, animations, video game items etc. in digital form. They are non-fungible which means that they are identical and cannot be swapped like bitcoin that has 21 million copies that can be swapped for one another and has the same value. Each NFT has its own value and can be bought and sold like the cryptocurrencies using the cryptocurrency platforms. With above $65 Billion in market cap NFT’s are growing rapidly.
What’s the hype all about?
The hype around DeFi and NFT’s is gaining extensive ground due to the digitalization of every asset we see around us. The market capitalization on the last day of November 2021 is over $156 Billion for DeFi space and NFT’s Market Cap is over $65 Billion that indicates huge craze among the retail as well as institutional investors.
Many institutional investors such as Tesla, Twitter and others have created their own NFT’s. The vision of Metaverse has also pushed the hype around the DeFi and NFT’s to a new height. The experts are of the opinion that every tradable asset will soon have a tokenized proxy (NFT) that will be traded on the blockchain with the help of DeFi platforms.
More and more retail and institutional investors are investing in DeFi and NFT’s as they are the future of finance and trading.
Takeaways
- There is a hype around Decentralized Finance as it solves the pain points of centralized finance and provides individual control over the assets of an individual.
- There is a hype around the NFT’s as the world is quickly seeing a rapid growth in the digital assets and their potential value in the metaverse.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
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