From Nasdaq, Inc.:

The crypto market is shifting towards a new phase in 2024, driven by optimism, recent regulatory approvals, and technological innovations. Decentralized finance (DeFi) is showing promise, especially as central banks signal rate cuts, making DeFi yields more attractive as alternative investments.

The first phase of DeFi was characterized by highly incentivized ecosystems with unsustainable yields and complex protocols. Security attacks and declining yields deterred investors, yet the ecosystem maintained strong adoption and communities.

For the next phase of DeFi to succeed, it needs to align with new market conditions and technological innovation. This involves transitioning to smaller, more granular “DeFi micro-primitives” and creating new financial ecosystems. Institutional adoption also requires robust financial services and risk management.

Regulation, user experience, and granularity of DeFi primitives are key challenges for retail investors. A better user experience and simpler primitives are necessary to increase retail adoption of DeFi. Additionally, this new phase of DeFi should be more utility-driven, organic, and simpler to validate as a parallel financial system to traditional finance.



Read more: The Next Phase of DeFi Is Here