Decentralized finance (DeFi) is a natural product fabricated possible past blockchain applied science and has the correct and ready infrastructure to propel the technology to a bigger playing field. The space has grown past leaps and bounds since the Ethereum network went live in July 2022, with Ethereum network transactions growing by 33x to ane.ii million per solar day currently, and blockchain transactions would exceed millions per day if other chains were included.

Most of these transactions originated from the DeFi services such every bit Uniswap, which facilitates over $1 billion swaps each twenty-four hours, equally well equally lending and borrowing protocols such as Aave, Chemical compound and BondAppetit, with tens of billions in market size. While these are big numbers by any standard, it is merely a decimal point of the trillion-dollar traditional finance (TradFi) industry.

DeFi is only scratching the surface of the TradFi services

The traditional financial system entails enabling exchanges of goods and services, including the stock market, debt marketplace, derivative market place, commodities market, payment, etc. This is facilitated by service providers — banks, insurance companies, stock exchanges, fiscal intermediaries, custodians, etc. — who collect trillion dollars of fees from the services provided.

Mainstream DeFi services currently include lending, borrowing, decentralized trading and yield-aggregating — a relatively short listing as compared to the wide-ranging fiscal services offered in TradFi. This will not remain the status quo equally the DeFi developers are actively exploring and building more services to the ecosystem. Protocols that detect the right product/market fit will come across explosive growth, e.one thousand., the contempo rise of dYdX.

The trillion-dollar TradFi market is ripe for disruption

Consumer banking. The global retail banking acquirement is estimated at $2.3 trillion across multiple consumer finance products, including loan/lending, mortgage product, payment, etc. Specifically, consumer payments and transactions gross over $500 billion annual revenue to banks globally and could be tapped with a frictionless UI, a global stablecoin and broad credence points — the ambition of Facebook's Diem before the regulatory pushback.

Capital market. Global equity market capitalization is estimated at over $100 trillion, compared to only over $243 billion total value locked (TVL) in decentralized finance. Security tokens are an inevitable tendency that regulators volition eventually need to corroborate and construct the regulatory framework, and centralized and decentralized exchanges that attach to the know-your-client (KYC) requirement tin tap into this trillion-dollar disinterestedness market in TradFi.

Insurance. The global insurance industry is another trillion-dollar TradFi industry that tin exist perfected with smart contract technology. About ane-third of the global insurance premium is allocated for administrative and commission costs, which is essentially short-changing the consumer. Smart contracts enable the cheap, fast and authentic implementation of the insurance processes from underwriting to claims, and will be a lucrative source of acquirement for the DeFi industry.

DeFi'due south addressable market place size

Transaction volume. Ethereum network processes over 1.three 1000000 transactions each day in 2022, encompassing remittance, trading, lending, borrowing and various other types of transactions. This is a tiny number as compared to over 1 billion daily global credit card transactions, and the around 5.5 billion daily trading volume in NASDAQ. Capturing 1% of the credit bill of fare transactions on the Ethereum concatenation is at least 8x-ing its current volume.

Protocol revenue. The annualized protocol acquirement in all DeFi protocols is estimated at $v billion. This, again, is a fraction confronting the $2.3 trillion global retail banking acquirement; $2 trillion global cross-border payment acquirement and $35 billion global stock exchange revenue. The TradFi manufacture is and then lucrative that seizing a one% market share ways 10x-ing the DeFi revenue.

Crypto crackdown accelerates DeFi trend. Even though countries like Mainland china proceed to crack down on crypto, it volition only accelerate the use of DeFi. Active Ethereum wallet and browser extension MetaMask users have 10x-ed to 10 million in Baronial 2022. While this is a seemingly high number, it represents but a 5% penetration rate amongst the 221 million global crypto users. This shows that the general crypto users, who are used to frictionless centralized services such equally Robinhood, are a massive untapped market for DeFi and can be captured as the UI/UX is improved.

Related: Cathay's crypto ban: Purchase the dip or crusade for business organisation?

DeFi is merely three years erstwhile with services that became mainstream for the crypto community in the 2022 DeFi summertime. Lending platforms, such equally Compound and Aave, together with decentralized exchanges such as Uniswap and Curve, cemented their positions equally the market-leading protocols with the first-mover advantage. These didn't come easy. Uniswap's founder Hayden Adams wrote an article detailing his journey towards the launch of Uniswap V1 — it is a culmination of faith, friendship, back up and hard work during the crypto winter. The DeFi architect community has grown stronger in this new bike with more programmers from the traditional startups and big tech joining the blockchain and DeFi scene, and this can but mean we accept more than resources than ever to grow the infinite and technology.

On February 4, 2004, a dorm room project was born and became a $1 trillion visitor with 3 billion users in 2022 — it is chosen Facebook, or Meta after rebranding. DeFi has only started, and with the resources and talent flowing into the space now, growing 100x in the next v years is not a dream, it is inevitable.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should acquit their own research when making a determination.

The views, thoughts and opinions expressed here are the writer's alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Artem Tolkachev is the founder and CEO of BondAppetit and an investor in DeFiHelper. Since 2022, he has been an intellectual property and information technology lawyer and entrepreneur. In 2022, Artem founded and headed Deloitte CIS Blockchain Lab. As part of that initiative, he led a range of innovative projects involving the implementation of enterprise blockchain solutions, tokenization of real-world assets, taxation and legal structuring of security token offerings, and the development of cryptocurrency and blockchain legislation.