DeFi
Driving the adoption of DeFi and DePIN in the Web2 ecosystem
Over the years, blockchain technology has evolved from simply facilitating peer-to-peer money transfer to sophisticated functions such as decentralized finance (DeFi) and decentralized physical infrastructure network (DePIN).
DeFi includes products that decentralize the traditional financial system, while Of pine enables the decentralization of physical infrastructure and other real-world products, by combining Web2 and Web3 ecosystems. Together, these two innovations aim to offer everyone more organized structures and products.
This article delves into the intricacies of DeFi and DePIN for Web2 businesses. It highlights the central role CLS Globala renowned provider of cryptocurrency trading services, is playing a role in supporting these initiatives.
DeFi and DePin: the drivers of the emergence of more organized structures and products
DeFi is an umbrella term that mixes “decentralization” and “finance.” The idea behind this concept is to integrate the services offered in the traditional financial sector into the blockchain ecosystem. Imagine applying for a loan on the blockchain or depositing your cryptocurrency holdings into a pool of funds for passive income. This is precisely what DeFi brings.
Banks or other centralized financial institutions function as intermediaries between investors and the desired financial product in the traditional financial system. Leveraging blockchain technology, DeFi projects are changing the game by allowing users to execute transactions by interacting with self-executing computer programs called smart contracts. The mechanisms of the DeFi ecosystem give investors complete control over their funds.
The DeFi sector offers many products. These include borrowing and lending services, earning returns through yield farming, staking tokens to strengthen blockchain security, and much more.
The Decentralized Physical Infrastructure Network (DePIN) is an innovation that integrates blockchain functionality into physical hardware, such as servers or networks. Instead of relying on a single entity, a network of participants helps build, maintain, and manage the infrastructure, making it more accessible, transparent, and distributed.
Essentially, DePIN allows physical infrastructure such as real estate, solar panels and batteries for energy systems, access points and routers for wireless networks, or servers for cloud computing to be tokenized on the blockchain. Additionally, DePINs can function as DeFi projects, allowing users to trade, borrow, lend, and stake tokens.
With their vast capabilities, DeFi and DePIN have the potential to improve the global financial system by making financial services more accessible, reducing costs, and eliminating intermediaries. These innovations also improve transparency and security, which are rare in today’s traditional financial system. Blockchain’s transparent record of transactions helps reduce fraud and build trust, while its decentralization makes systems less vulnerable to security attacks.
DeFi and DePIN provide users with complete control and flexibility over their assets and transactions without relying on central authorities. They also foster innovation by supporting various financial activities and applications, leading to a more efficient economic system.
Advantages of DeFi and DePIN
Accessibility: They provide financial services to people who may not have access to traditional financial institutions due to geographic or regulatory limitations.
Reduced costs: The operational costs of blockchain-based projects are significantly reduced as intermediaries and central authorities are removed.
Increased transparency: While financial institutions can offer some transparency, blockchain technology ensures extensive transparency and verifiable transactions.
Enhanced security: Decentralization provides better protection against hacks because there is no single point of failure.
Complete asset control: Unlike financial companies that manage users’ money, DeFi and DePIN projects allow users to fully manage their assets.
The Challenges of DeFi and DePIN
Regulatory obstacles: As regulators around the world continue to figure out how to regulate these new technologies, rules and guidelines are constantly evolving. This uncertainty can create challenges for users and developers who must comply with the ever-changing laws and regulations surrounding cryptocurrencies.
Technical complexity: The technology can be complicated for users to understand and use. Overcoming this obstacle requires every user to make an effort to study and understand the world of blockchain.
Scalability issues: Handling large transaction volumes can be challenging depending on the underlying blockchain network. However, some blockchains have overcome this challenge through the Proof of Stake (PoS) consensus mechanism and other similar innovations.
Risk of total loss of funds: The decentralized nature of blockchain makes it nearly impossible for investors to recover funds sent to the wrong wallet addresses. The same challenge arises when users fall victim to cyber exploits such as phishing attacks.
DeFi and DePin Merging with Web2 Companies
Today, centralized entities own and operate the most prominent businesses and projects. This means that users rely on a single authority and remain vulnerable to a single point of failure. However, DeFi and DePIN have sought to change the narrative. Both innovations aim to revolutionize the way Web2 businesses operate with their various features. Here’s how.
As highlighted earlier, DeFi brings decentralization to traditional finance (TradFi). It is possible to merge DeFi with Web2 companies, especially those specialized in TradFi, such as banks, hedge fund managers, brokers, etc. Such a merger will allow clients of these Web2 companies to access DeFi functions such as decentralized lending, borrowing, staking, and farming. Unlike most TradFi companies that charge high transaction fees, DeFi comes with minimal network fees, depending on the underlying network used.
DePIN’s merger with Web2 companies has the potential to benefit users and any companies involved. DePIN inherently places control of physical infrastructure in the hands of investors, giving them governance rights over the product(s) and increasing transparency. Users are also rewarded with tokens for participating in DePIN projects, incentivizing more people to join the ecosystem.
When traditional Web2 companies, like Tesla, Airbnb, and others, integrate DePIN into their products, they automatically welcome millions of DeFi users into their ecosystem, potentially increasing their user base and revenue stream.
Interestingly, the adoption of DeFi and DePIN in the traditional Web2 ecosystem can increase the number of cryptocurrency users and bring more profits to companies exploring the idea. Let’s take a case study. In January 2024, multinational asset manager BlackRock joined several financial firms that launched a Bitcoin spot exchange-traded fund (ETF), an investment vehicle that combines the traditional financial system with the leading cryptocurrency.
Following its introduction to the US financial market, BlackRock’s Bitcoin ETF has seen massive inflows, skyrockets The company’s assets under management reached $10.6 trillion. BlackRock’s stock price also rose.
BlackRock’s performance with the Bitcoin spot ETF shows that there is a lot to be gained from leveraging blockchain technology. If Web2 companies adopt DeFi and DePIN into their ecosystem, both traditional and crypto financial markets will experience harmonious growth due to the increasing demand. At the same time, more investors who are unfamiliar with blockchain will be enlightened about how the technology works, leading to its widespread adoption.
CLS Global: the missing piece
Founded in 2017, Coin Liquidity Solutions (CLS) Global is a digital asset services provider specializing in market creation expertise and consulting. Its CEO, Filipp Veselov, currently leads the company. The Dubai-based platform manages over $1.5 billion in assets to ensure project growth and marketplace success.
CLS Global’s market making involves the platform team guiding clients (crypto projects) towards adopting advanced strategies to help them thrive in the cryptocurrency market. Its advisory function involves offering comprehensive knowledge to projects, giving them coverage in the competitive digital asset sector.
In addition, the company funds new cryptocurrency projects through its venture capital arm, helping to accelerate the growth of projects in the sector. CLS Global also supports its clients at all stages of development: idea stage, pre-launch, launch phase and post-launch.
The platform offers its services as an all-in-one package, as its clients receive all or some of these services to push them to new frontiers. CLS Global’s website boasts over 500 active clients and over 1 million attracted holders. It has also integrated with over 100 exchanges in the crypto industry. At press time, 10% of the top 200 projects in the CLS Global ecosystem have secured a listing on the CoinMarketCap price tracking platform.
CLS Global positions itself as a top choice for those looking to combine DeFi or DePIN with Web2 businesses. The project has nearly a decade of experience in the digital asset sector, having weathered three bear cycles and was around when both innovations were launched in the cryptocurrency market. Additionally, decentralized projects are among CLS Global’s partners, which shows its established history with the DeFi field.
Conclusion
CLS Global supports the integration of DeFi and DePIN into the Web2 ecosystem by offering market making and advisory services. With its expertise and support, companies can benefit from increased transparency, security and efficiency, thereby promoting innovation and growth in the digital asset sector.
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