Key industry figures predict the future of DeFi in 2024.

This past year may have been quieter than most in decentralized finance (DeFi), but that could all change very soon. Next year looks to be a historic time for DeFi as the crypto winter thaws and many trends reach their natural maturity points.

Cointelegraph spoke to experts from various industries to find out what 2024 holds for decentralized finance.

The sector is generally in good spirits at the moment. Optimism abounds as green shoots of renewed growth begin to appear. Julian Deschler, co-founder of Web3's privacy protocol Elusive, has been one of the most recent leaders opposing DeFi's prospects.

“We once again expect constructive growth in the DeFi ecosystem. The projects that have been able to explore the past two years and continue to deliver are a sign of real value and resilience. We see 2024 as the year when these projects will catalyze legal agility for DeFi and begin long-term mainstream adoption.” Deshler told Cointelegraph.

Cain Warwick, founder of Derivative Markets Ecosystem, echoed those sentiments. Warwick told Cointelegraph that 2024 “will also end the bear market. We have seen impressive price progress this past quarter and should expect this to continue throughout the year as macro liquidity eases.

Deschler and Warwick are joined by Sam McPherson, co-founder of Phoenix Labs and promoter of MakerDAO's subDAO Spark, who are excited about a big year ahead. According to his analysis, there is strong evidence that a bull trend is emerging.

We are excited to see all these RWA tokenizations coming online. The space is growing rapidly.

— Sam McPherson (@hexonaut) December 18, 2023

McPherson told Cointelegraph, “Looking at the manufacturer's balance sheet for five years, I don't see a benefit like this coming online from 2021. I think the bull market will start soon – in 2024, of course.

Regulation and transparency

One area of ​​profound change is regulation. In the year In 2023, the crypto industry regularly clashes with US lawmakers who want to impose themselves on the crypto industry. DeFi is likely to avoid scrutiny in the coming year.

Nathan Catania, a partner at XReg Consulting – a public policy and regulatory affairs consultancy specializing in crypto – told Cointelegraph that true DeFi is much less to fear than centralized alternatives.

“Most DFI projects have some centralized control elements and are actually hybrid finance (HyFi), which means there is a gap between SeFi and [centralized finance] and DeFi,” Catania explained. “In 2024, true DeFi will continue to remain outside the regulatory perimeter, as it cannot be regulated by current regulatory paradigms. However, it will be the year that regulators in many jurisdictions, including the US, regulate hi-fi.

Anthony Zolciak, co-founder of Aleph Zero – a privacy-enhancing Layer 1 – also believes 2024 will be an important year for regulation.

“It shows the entry of institutional capital into crypto markets through ETFs [exchange-traded fund] Discussions, asset tokenization and major web 3 startups, DeFi readiness is in focus. In 2024, major market trends in DeFi will focus on addressing institutional risks and enhancing compatibility with regulatory frameworks. The industry recognizes the challenges it faces with features such as unlicensed markets and anonymity, leading to a critical shift in proactive adherence to a fine balance between privacy and transparency.

Speaking to Cointelegraph, Zolciak continued, “The focus on transparency and compliance is shaping Defin's direction. […] Critical solutions to institutional problems are already emerging. On-chain intellectual property protection, real-time AML [Anti-Money Laundering] Analytics and decentralized order book exchanges represent a move to protect proprietary trading strategies.

Symbol of everything

Some industry observers say one of the biggest trends for 2024 will be tokenization. From new dividend-linked stablecoins to real-world assets (RWAs) tokens, the sector has the potential for significant growth.

Anything that can be on-chain will be on-chain by 2024, and on-chain fiat provides just one example of this larger trend, says Sven Valfels, co-founder and CEO of Monerium.

“Fiat currencies are playing an increasingly important role in trading and integrating traditional assets on the blockchain,” Valfels told Cointelegraph.

“That's why a fully permissioned and regulated subset of Statcoins is expected to gain momentum in 2024 and beyond. This is highly driven by passion. [RWAs] And their potential to transform the sector as well as on-chain P2P payments. To capitalize on this trend, there will be a need for solutions that allow seamless integration with traditional payment systems, enabling direct transfers between off-chain bank accounts and Web3.

Valfels predicts a future where “bonds, stocks and treasuries are seamlessly integrated on the blockchain,” with 2024 being a critical step on that journey.

Valfels isn't just a voice predicting big things. Kevin de Patol, founder and CEO of Quiroc, has his eyes on the sector.

As the head of digital market creators told Cointelegraph, “In 2024, tokenized treasuries will continue to play an important role, serving as a bridge between TradFi and DeFi. […] However, by 2024, Diffie's main market trend will be tokenization of all assets. While tokenized treasuries are the starting point, other real-world assets such as stocks, bonds, real estate, and carbon credits are tokenized. This change is expected to increase liquidity, reduce transaction costs, and provide new opportunities for DeFi protocol designs.

“Another significant trend is the growth of stablecoins that offer yields backed by tokenized treasury bills. As stablecoins already play an important role in the DeFi ecosystem, the inclusion of yielding features backed by real-world assets may attract more conservative investors, which in turn contributes to increased liquidity, accessibility and innovation in the decentralized financial space.

Tokenization powers DeFi.

Tokenization will power much of the def sector by 2024, with some areas seeing 10x growth, according to Danny Chong of Tranches, an asset tracker that improves productivity. Chong is among industry figures predicting his importance in shaping the coming year.

“The 2023 tokenization wave not only proves blockchain's versatility, but also bridges the gap between traditional and decentralized finance, positioning it as a powerful force in bringing greater accessibility and liquidity,” Chong told Cointelegraph.

“Real-world asset simulation and development of advanced structured products are two key trends that have the potential to drive market maturity by 2024. […] The landscape is now seeing a greater shift towards Liquid Staking Tokens (LSTs). This shift goes beyond cryptocurrencies and into tokenization of real-world assets, expanding the scope of their use as collateral.

Warwick predicts further growth in the decentralized stablecoin market: “The rise of decentralized, crypto-native stablecoins will be a significant trend in 2024. Introducing projects like Etena, based on commercial scale, will be a big change. 2024. I expect this to continue throughout the year, and we will see more decentralized street coin projects come to market.

Connor Ryder, head of research and data at Internet bond company Etena Labs, went even further. Ryder believes that yielding stablecoins will be the must-watch trend of the year. Speaking to Cointelegraph, he said, “The focus is expected to shift to production stablecoins. We estimate that the production of stablecoins is the fastest growing DeFi sector, expanding from about $1 billion to more than $10 billion, and these stablecoins are set to expand further. Their products are expected to originate from both staked Ether-based and RWA-based stablecoins, which will increase their market presence.

According to David Siska of Vega Protocol DX, tokenization is an opportunity to shine a light on the advances made in the crypto ecosystem during the crypto winter.

“Simulating real-world assets is complex in terms of legislation and regulation, but we now have the blockchain capacity and technology (like L2s and rolls on Ethereum) to make this a reality. We weren't ready for RWA in the previous market cycle. But today, the macro environment is different; “The technology is vastly better; and there's a lot more capital on the chain,” Siska told Cointelegraph.

“My prediction is that RWAs will have an impact on derivatives trading first, as perpetual and futures markets may quote RWAs from different verbal providers. For example, oracles such as Peet, Redstone and Chainlink offer different RWA price feeds,” Siska said, adding, “To mature beyond price speculation, DeFi will be more than real.” It has to interact with the economy. A financial system that is not connected to the real economy is useless.

Other main forces

Another important event in the development of Layer 2s is from 2023 to maturity in 2024. Mathieu Baudet, CEO of microchain pioneer Linera, predicts that new solutions will emerge to meet the challenges of working on Layer 2s.

“While 2023 is the year of betting on Layer 2s, 2024 will be the year of consolidation – especially for DeFi-based protocols,” Baudet told Cointelegraph. By sharing a decentralized tracker instead of using layer-1 transactions.

Elsewhere, Sung Min Cho, CEO and founder of Web3 messaging firm Beoble, expects Web3's social platforms to take off by 2024. Cho told Cointelegraph, “As we head into 2024, I expect Web3's social platforms to continue to grow and evolve. The ecosystem […] From an industry perspective, greater regulatory transparency, growing consumer demand, and new technological developments will keep Web3 social platforms on the lookout.

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