Shaping Up a Sustainable Future for the DeFI Space
In a DeFI Space that is constantly filled with a roller coaster of emotions, it is sometimes hard to imagine a sustainable future for this new space. From the highs of skyrocketing values of Digital Assets to the lows of major meltdowns, the community has seen all the impacts that Digital Assets bring but can it change for the better in the long run? Is it possible to picture a sustainable future for the DeFI Space within 2024? Let us take a look!
Financial and Environmental Sustainability
Looking back to the origin of the DeFI Space, you might see a comparison that grows so deep to the traditional financial method we have. Bitcoin not only emerged during a Major Financial Crash in 2008 but it also championed itself as a much more efficient alternative to the traditional Fiat Currency due to its continuous devaluation. The fact is true that the DeFI Space was built around this idea to rival the traditional financial system.
These rivalries continue to grow over the years and branch into different aspects of the financial world from regulations to adoption. Our Traditional Financial System is a system that has been in operation for more than centuries and has worked well despite its imperfection so there is a challenge for DeFI to replace it altogether. Although the potential of DeFI as of the last decade should no longer be doubted as adoption continues to grow.
As of 2023 figure, the Global Adoption rate of Digital Asset worldwide has reached more than 420 Million users with an expected figure of 1 Billion users by 2030. This growth continues to rise despite the Meltdown in 2022 and as of this year 2024, Bitcoin and other Digital Assets are back to breaking their all time highs again. The growth of the DeFI Space also continues with a steady 4.2% CAGR and revenues reaching 9.07% resulting in a projected total amount of US$37,040.0m by 2028.
The amount of growth that is unrivaled by other asset classes, institutions and banks also start to be attracted to the DeFI Space. The recent Spot ETF approval is a teaser into how DeFI are slowly being adopted by TradFI which expands the growth of the space beyond its own network. These adoption also started to shift towards governments with El Salvador being a catalyst for seizing the opportunity early to adopt the DeFI Space.
With this growth and highs that DeFI are currently experiencing, the question remains which is why isn’t DeFI popular? Although great as it seems, the DeFI Space is still plagued with challenges surrounding its “Sustainability” for the long run. Sustainability might be a simple word and its aspect goes to different parts of the DeFI Space as it is still a relatively maturing industry but it’s a problem that needs to be overcome within the future.
DeFI with its inherent decentralized nature, cost-effectiveness, and enhanced accessibility is certainly a breakthrough technology in establishing Green Financing. In an era where Sustainable Investing has risen on top of the priority, eliminating intermediaries through the prowess of blockchain technology can be a winner moving forward. Its main challenges on Sustainability lies not on the technology itself but the current application within the DeFI Space.
Financial Sustainability seems to be the prominent challenge that the community focuses on as the value of Digital Assets keeps swaying over time. At the present 2024, all time highs are aplenty within the space but there is no guarantee if things will stay that way. These volatile cycles are what pleases investors on the Blockchain Technology rather than on the Digital Asset itself so something needs to change if DeFI were to be the future or our Financial Ecosystem.
Another important factor with Sustainability is Environment as the mining process within the DeFI Space is notorious for leaving an adverse impact on our ecosystem. We all remember the rejection of Tesla to adopt Bitcoin in 2021 due to the energy intensive mining process. The main environmental concern obviously lies with blockchain networks utilizing the POW Mechanism as it requires high energy consumption leading to a massive carbon footprint.
Solutions have obviously been applied to tackle the Environment Sustainability side of DeFI with blockchain networks such as Ethereum adopting a switch to Proof Of Stake mechanism in 2023. With Ethereum being the most utilized blockchain network, this switch is instrumental in reducing the carbon footprint of the DeFI Space by more than 90%. Other initiatives include adopting Layer 2 Solution into existing POW Blockchain networks.
With upgrades and innovations that continue to flow towards the DeFI Space, shaping a sustainable future may continue to be a possibility. While Financial Sustainability still seems to be a challenge as the DeFI Space continues to jolt up and down, it’s a huge progress to know that strides have been made to establish the space as the future of our Financial Ecosystem. All that remains right now is to continue the progress of Net Zero ambitions for the future!
Encouraging Breakthrough Innovations
Sustainability will not be possible without the breakthrough innovation that has arisen within the ecosystem. Just like the phasing out of Fossil Fuels in replace of Electric Vehicles, the DeFI Space have also has the possibility to be the future of our financial system. The greatest challenge to attaining that goal is proving itself to be sustainable on both fronts of Sustainability that can be relied upon by the worldwide community.
The blockchain technology is obviously a revolutionary invention that can enable global payment to be done in a matter of minutes without the need of any intermediaries but it also is still a maturing world that is still finding its pattern. It is integral that its application is done for the right purpose such as for payment processing service or tokenizing commodities and not merely for creating Dog like Memecoins which will fade away as quickly.
This is why Real World Asset is not only a growing norm within the DeFI Space but also a trend that needs to be encouraged to grow within the future. Pairing up the prowess of Blockchain Technology with Real World Asset such as Commodities will not only give the Digital Asset an intrinsic value but it allows the asset to be owned by the global world. This will also help tackle the carbon footprint that are involved in owning this physical asset.
Regulations will also play a key role in encouraging innovations that are sustainable for adoptions by the community within the long term. While the final piece of puzzle are all of us the adopters with Sustainable Investing an important part of our consideration. Moving forward we need to choose projects that are providing sustainable solutions to the DeFI Space and encouraging growth over the long term as Sustainability is the key to Value!
We from the Nagaya Technologies Pte. Ltd are proud of the development of the DeFI Space. We believe in the enormous potential that Blockchain Technology may bring and while Sustainability should be the key idea in its application. Nagaya becoming the World’s First Hybrid Digital Asset continues our commitment to expand real-life adoption of Blockchain Technology Sustainably. Intrigued to know more about Nagaya, you can visit us at www.nagaya.co
Or you can obtain your Nagaya now through the Latoken Platform at https://latoken.com/exchange/NGY_USDT
