Forbes India 15th Anniversary Special

DeFi projects became so strong to compete traditional banking systems

Defi market is growing with an astonishing speed. Level01 becomes one of the main engines of DeFi

Published: Aug 5, 2020 04:17:44 PM IST
Updated: Aug 6, 2020 03:37:01 PM IST

DeFi projects became so strong to compete traditional banking systems
Decentralization is emerging as a fundamental pillar to social and economic issues given the rise of blockchain and cryptocurrencies. It is not surprising that the crypto market stats indicate over $300 billion is currently staked on the growth of decentralization, Bitcoin leads this pack with a market cap of $208 billion as of press date. Ten years ago, Satoshi’s idea was to solve the shortcomings in monetary ecosystems following the 2008 subprime mortgage crisis in the U.S. It was in this line that the unknown Bitcoin founder decided to build a monetary ecosystem that is not run by the Fed but an underlying algorithm consensus.

The idea has since survived the times when it comes to payment networks although a few issues like scalability and security are still ongoing. That said, Bitcoin’s decentralization aspect is now finding its way into other industries as well, especially the financial services sector. Recent months have seen crypto niche innovators on board financial products such as lending and saving on the Ethereum ecosystem. This has given rise to what is today known as Decentralized Finance (DeFi), a market that has grown more than threefold in just two months to hit $4.06 billion in total value locked (TVL).

Surprisingly, most of this growth happened at the peak of the COVID-19 pandemic as other sectors struggled to survive let alone making some revenue. At the onset of the pandemic, the DeFi market was barely $1 billion and was yet to gather much hype from stakeholders in the crypto scene. The growth trend, however, changed at the beginning of May when Compound announced the launch of its governance token. In fact, it did not take long before Compound overtook Maker as the leading DeFi at the time, a short lived glory since the latter already regained its top position with over $1.23 billion in TVL according to DeFi Pulse metrics.  

Level01 Becomes One of The Engines of DeFi

Traditional banking ecosystems have for long acted as barriers to accessing financial services despite being viewed as the on-ramp to certain products. Today, their existence is being challenged by the rise of blockchain which has made it possible to obtain similar services without the hustle of going through a centralized entity. The DeFi space in particular is set to play a major role in banking the unbanked with crypto assets that have financial utility.

While most innovations have mainly focused on lending and savings, some market players like Level01 have gone a niche higher to offer a P2P derivatives exchange within the DeFi ecosystem. Basically, this DeFi platform does away with the middleman by making it seamless for traders to interact directly with each other in a trusted P2P network that derives fundamentals from blockchain. Traders can, therefore, exchange derivative contracts which are based on commodities such as gold, oil, silver, fiat currencies and digital assets as well. By doing this, Level01 plans to decentralize trading in the huge derivatives market that is currently valued at over $542 billion.

At the core of trade executions is a smart contract infrastructure; this tool allows for trades that have been matched through the Level01 hybrid proprietary engine to be processed and settled on Ethereum’s blockchain. Notably, the proprietary engine has an underlying algorithm utilizing predictive AI, the kind the market hasn’t seen before which prices the option and derivative contracts based on real-time data from the market.

The AI known as FairSense helps traders assess the risk/reward through projections, thereby leveling the playing field for retail traders who can trade like pros using the algorithm. This allows traders to profit from price movements of cryptos, forex and commodities, especially at these uncertain times.

The derivatives exchange has a native token LVX token that is currently being traded on Digifinex. The token is ranked #263 on CMC with a total supply of 1.2 billion but only 150 million in circulation.

The token is currently trading at $0.21 with a market cap of $31 million. LVX has seen an ROI of 68% since getting listed on at the start of July, making it one of the most promising and fastest-growing coins within the crypto market.

Going by these fundamentals, Level01 is one of the DeFi ecosystems that stands a chance of challenging Maker and Compound as the leading protocols in TVL. The platform’s niche as a DeFi derivative exchange will likely pay off as the market comes of age to understand beyond lending and saving products within this space. Should this happen, Level01’s native token ‘LVX’, will be well placed in terms of liquidity and exposure to more crypto markets, increasing its prospects of becoming an industry giant as well, being that the derivatives market is huge, and decentralized trading is only scratching the surface.

Though its growth was unprecedented, Decentralized Finance might soon be a big game-changer for the digital economy. Most of the world’s population has already shifted to digital payments following the COVID-19 pandemic, a trend that might further boost activity in DeFi. Consequently, the space is now a hot cake for stakeholders not only in crypto but the larger finance market. It is not surprising that big crypto exchanges like Binance are increasing their foothold in DeFi; CZ, the CEO and founder of Binance, recently joked on Twitter that soon VC’s will start calling themselves ‘DeFi Fund’. Going by such developments, the DeFi space is worth keeping tabs on, over the course of 2020.

Disclaimer: The views, suggestions and opinions expressed here are the sole responsibility of the experts. No Forbes India journalist was involved in the writing and production of this article.