Global interest in decentralised finance has exploded within recent months. With over US$6 billion currently locked (and counting), DeFi mania shows no signs of slowing down.
If you are unfamiliar with DeFi, it stands for decentralised finance and represents an ecosystem of protocols and projects that mimic traditional financial services, but on steroids.
In DeFi, you can lend, borrow, and provide liquidity to earn interest rates that are impossible to find in traditional markets. Naturally, there is a risk attached, but now users can purchase insurance to protect their loans and upside.
This momentum has attracted some of the biggest funds and entrepreneurs in Asia, who are helping spawn a new financial revolution.
Surprisingly, Asia was seen as “slow” to the original DeFi party last year. According to The DeFiant, only three of the top 20 DeFi projects in 2019 were based in Asia, representing only 10 per cent of the US$500 million locked in various DeFi applications.
Looking forward, Asia presents a golden opportunity for DeFi applications to demonstrate their utility beyond short-term speculation. With significant parts of the population remaining underbanked, and traditional financial institutions often overlooking small businesses, Asian markets are ripe for financial disruption.
Golden Opportunity
Luckily, the disruptive potential of DeFi technology hasn’t been missed by regional startups. Despite a slower start, targeted products and use cases are now being developed at lightning speed.
Singapore is currently deep in the process of completing its digital bank charter and infrastructure by 2021, China has already soft-launched its own sovereign digital currency (DCEP), and Cambodia is tantalising close to finalising its nationwide blockchain payment system.
Despite the outburst in productivity, Asia’s interest in DeFi shouldn’t come as a surprise. A significant amount of global blockchain web traffic comes from users within the region, despite a relatively small number of officially registered projects.
Savvy consumer interest and legacy financial inequality are potent motivators for plucky fintech startups.
This can best be seen in the emerging community that has grown around DeFi in Asia, despite challenges with the global pandemic. In June and August, Southeast Asia DeFi Week launched two events, bringing together thousands of companies and DeFi users in a completely free to attend digital setting.
Also Read: Fiat or crypto? Why the payment giants are warming up to digital assets
Ongoing developments with less volatile DeFi solutions may rapidly pave the way for wide-spread adoption. Here are some of the projects and people to watch in DeFi’s Asia scene.
Who to Watch
For a lot of DeFi spectators and participants, Singapore-based Ramp DeFi is one of the most highly-anticipated DeFi launches. Ramp aims to free billions of dollars in liquid value through their innovative liquidity bridge and ecosystem which will enable effortless cross-chain value accretion and essential liquidity movement.
This means users are able to deposit their staked assets and recycle them into liquid capital (Total Value Unlocked).
A key advantage of Ramp’s novel approach is the retention of staking returns whilst minting fresh capital for investment. No longer will investors have to choose between opportunity cost and staking yields. Speaking of investors, leading Asia investors, such as Hong Kong-based Alameda Research, have backed the project and many others in the ecosystem.
Polkadot Projects
If you have been following blockchain, you have likely heard of Polkadot, the flagship project by Web3 Foundation, with a token (DOT) now ranked in the top 10 largest cryptocurrencies by market cap.
Polkadot allows companies to build a custom blockchain in just minutes using the Substrate framework and provides startups with a large community filled with resources to build and scale applications.
While not completely Asia-based, Polkadot has been the technology of choice for many of the top DeFi projects in Asia, such as Mantra Dao, RioDeFi, and others.
Mantra Dao is a DeFi platform focused on increasing adoption for the staking and lending by facilitating instant access to stable coin loans in exchange for cryptocurrency collateral. Users are also able to lend their crypto and receive interest if they choose.
Also Read: How Blockchain is disrupting the traditional finance industry
Built on a Parity Substrate for the Polkadot ecosystem, Mantra Dao’s has amassed over 13,000 addresses soon after launching, making it the fastest-growing Polkadot DeFi project.
Based in Hong Kong, RioDeFi is on a mission to accelerate the adoption of digital assets by bridging traditional and decentralised finance. Similar to Mantra Dao, RioChain is built on the Parity Substrate framework and fully compatible with the Polkadot network.
RioChain will allow lower transaction fees, faster confirmations, and more efficiency for applications that build on RioChain. With this in mind, businesses, and as a result, everyday people will have greater access to distributed ledger technology and DeFi services.
Investors to watch
Asia-based investors have not been shy when it comes to investing in DeFi. Funds such as Kenetic Capital, Alameda Research, Waterdrip Capital, Signum Capital, Blockwater VC, and others can often be found backing many of the latest leading DeFi companies. Industry veterans such as Korea-based Hashed and FGB Capital have also been very active in supporting DeFi projects in both seed and private rounds.
What is important to note about the current DeFi movement is the synergistic relationship that has taken place between funds, especially those providing strategic support. As with any bull market, money becomes easy to obtain for good projects and things such as networks, strategic value adds, and partnerships help funds obtain access to the top projects.
There are many exciting possibilities for the future of decentralised finance. What’s more, Asia’s increasing interest in equitable, inclusive and decentralised financial applications looks set to propel the DeFi space to unprecedented heights. Watch this space and how Asia continues to be the centre of attention for blockchain innovation.
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