From Nasdaq, Inc.:

Despite FTX’s collapse in late 2022, DeFi failed to seize the opportunity due to issues like immature infrastructure and complex user interfaces. DeFi’s TVL started 2023 at $38 billion, peaked at $53 billion in April, and currently hovers around $46 billion. Complex interfaces and high barriers to entry contributed to this underwhelming performance.

The primary issue for users of both DeFi and CeFi is uncompetitive pricing and execution, with 45% of respondents identifying this as a problem. Furthermore, DeFi’s poor capital and liquidity efficiency hindered its ability to compete with CeFi’s more efficient centralized order book models. Automate market makers’ (AMMs) struggle with high slippage when liquidity is low, deterring investors.

However, DeFi’s prospects for 2024 look promising. The recent win of Greyscale over the U.S. Securities and Exchange Commission (SEC) and the increasing involvement of traditional finance (TradFi) players signal a brighter future for DeFi. Additionally, zero-knowledge rollups and scaling solutions are gaining traction, potentially lowering fees and increasing network capacity for DeFi to compete with CeFi on a more even footing.

Despite an underwhelming 2023, DeFi’s future looks bright. The involvement of institutional players, ongoing advancements in zero-knowledge rollups and scaling solutions, combined with consistently lower cash burn rates compared to CeFi, positions DeFi for a potential breakthrough and catch-up in 2024. The industry has been building and establishing meaningful partnerships, laying the groundwork for a successful year ahead.



Read more: DeFi Fumbled Its Post-FTX Advantage in 2023, but There’s Still Hope for 2024