Global Decentralized Finance Market - 2024-2031

Overview

Global Decentralized Finance Market reached US$ 13.5 Billion in 2023 and is expected to reach US$ 270.7 Billion by 2031, growing with a CAGR of 45.7% during the forecast period 2024-2031.

According to the data given by the World Economic Forum in 2023, An estimated 83.4% of the global population possesses mobile phones. Notably, out of the 1.7 billion individuals categorized as unbanked (comprising 22% of the adult population), 1.1 billion are known to have mobile phone access. For these individuals, their initial exposure to financial services is anticipated to occur through decentralized infrastructure.

Similar to mobile phones, decentralized finance (DeFi) technology holds the potential to serve as a leapfrogging technology, allowing the underbanked to circumvent traditional financial systems and attain access to digital services and assets that were previously inaccessible. In under five years, decentralized finance has evolved into a billion-dollar industry, reaching a record market value exceeding US$ 180 billion. Since January 2020, the user base of DeFi has surged from approximately 91,000 to nearly five million. Growing product launches by the major key players in the region help to boost regional market growth over the forecast period.

North America is a dominating region in the global market due to the innovative product launches by the major key players. For instance, on February 09, 2023, Flux Finance launched Lending Token Collateralized by U.S. Treasurys. Flux Finance has invested in the Short-Term U.S. Government Bond Fund (OUSG) offered by Ondo, which is a tokenized representation of a Blackrock Treasury Bond ETF. After the recent introduction of Ondo Finance's U.S. Treasury-backed Government Bond Fund (OUSG), Flux Finance has unveiled a decentralized lending protocol.

Dynamics

Rapid Growth in the E-Sport Industry

A greater number of people are ready to spend money on gaming-related costs including gear, subscriptions and in-game purchases as eSports gain popularity. As such, this tendency could result in higher disposable money in certain populations, which in turn lead to higher levels of interaction with DeFi platforms and investment opportunities. eSports fans are usually tech-savvy people who know their way around digital platforms and technology. The particular group exhibits a higher inclination towards investigating decentralized financial alternatives, considering their dependence on digital platforms and technology.

Businesses that are involved in both DeFi and eSports use partnerships and cross-promotion tactics to expand their customer base. To promote its services and gain greater visibility, a DeFi platform is able, for instance, to sponsor eSports competitions or collaborate with influential gamers. Tokenization of real-world assets, including digital assets associated with eSports like in-game goods, virtual land or even ownership shares in eSports teams, is being investigated by several initiatives in the DeFi area.

The convergence of DeFi and eSports has the potential to generate fresh prospects for financial innovation and investment. Newzoo forecasts that between 2020 and 2025, the Compound Annual Growth Rate for eSports enthusiasts reach around 8.0%. It anticipate a rise in occasional viewers to 322.7 million and project the number of eSports enthusiasts to reach 318.1 million by 2025. Consequently, the total audience is expected to reach 640.8 million within the same timeframe. The global growth of eSports is evident, with mature markets such as North America and Western Europe showing sustained expansion.

Technological Advancements in the Decentralized Finance

By improving the scalability and throughput of blockchain networks, layer 2 technologies such as state channels and sidechains help to overcome the scalability issues that traditional decentralized financial platforms encounter. By rerouting transactions to secondary layers, these solutions reduce the load on the primary blockchain and enable faster and more economical transactions. The improvement in transaction speed and cost enhances the overall user experience and scalability of DeFi platforms.

With the help of decentralized identification systems, people maintain their identities autonomously and securely, confirming their identity without relying on centralized authority. DID solutions provide security and privacy in DeFi transactions by enabling safe authentication and identity verification, hence reducing the risks related to fraud and identity theft. For instance, on August, 29,2023, MegaSwap, a decentralized trading product of Bitget has a cross-chain swap mechanism built into the Bitget Wallet.

The function sources liquidity from a network of about 100 decentralized exchanges spread across 20 chains. MegaSwap, a decentralized trading offering from Bitget, automatically provides access to popular on-chain assets at regular intervals. It's important to note that an asset's availability through MegaSwap doesn't imply its listing on the Bitget platform.

High-Security Risks

Smart contracts play a major role in DeFi systems' ability to automate financial transactions. The smart contracts can, however, include problems and vulnerabilities that could result in money losses and assaults. Reentrancy problems and integer overflow/underflow are instances of code vulnerabilities that have been exploited in the past, causing consumers to suffer significant losses. Protocol-level hazards impact DeFi protocols, including lending platforms and decentralized exchanges (DEXs). Vulnerabilities in the governance protocols, consensus processes and blockchain network itself are among these risks. The integrity and security of DeFi systems can be jeopardized by attacks that target the consensus mechanism, such as 51% attacks in Proof-of-Work (PoW) networks or governance assaults in decentralized autonomous organizations (DAOs).

To carry out smart contract logic, DeFi systems rely on oracles to get external data, such as asset prices and market data. Oracles, however, have a single point of failure and are aymanipulated or exploited. Users suffer financial losses as a result of malicious actors altering oracle data to start fraudulent transactions or adjust asset values. DeFi platforms are inherently decentralized, although some elements like admin keys, governance procedures and liquidity pools have centralized control or single points of failure. Attackers use counterparty risks and vulnerabilities introduced by centralized components to undermine the security of the DeFi ecosystem as a whole.

Segment Analysis

The global decentralized finance market is segmented based on component, application and region.

Growing Applications of Decentralized Finance for Payments Application

Based on the application, the decentralized finance market is segmented into compliance & identity, assets tokenization, payments, marketplaces & liquidity, decentralized exchanges, data & and analytics, stablecoins, prediction industry and others. DeFi platforms offer financial services to individuals who are underserved or excluded from traditional banking systems. The accessibility attracts a broader user base, leading to increased adoption of payment services within DeFi.

DeFi payments often have lower transaction fees compared to traditional financial systems. Users looking for affordable means to send and receive money, particularly for cross-border transactions, find this pricing appealing. Blockchain technology is used by DeFi payment protocols to enable faster and more efficient transactions than those made through traditional banking systems, which need middlemen and long processing periods.

Geographical Penetration

North America is Dominating the Decentralized Finance Market

North America accounted largest market share in the decentralized market due to the growing adoption and integration of new financial technologies. The early adoption culture has helped DeFi platforms gain traction in the region. The region boasts advanced financial infrastructure such as robust banking systems, a well-established regulatory framework and a highly developed fintech ecosystem. A substantial percentage of the tech-savvy population in North America is an early user of new technologies, like as blockchain and cryptocurrencies, which form the basis of many DeFi applications.

In an indication of a possible regulatory approach to these platforms, US Securities and Exchange Commission has reexamined a proposal from the previous year that sought to classify decentralized finance (DeFi) platforms as exchanges needing regulation. The SEC suggested in January 2022 expanding the definition of "exchange" to include more trading activity conducted inside U.S.

Competitive Landscape.

The major global players in the market include Avalanche BVI Inc., BitMart, Brokoli OU, CardanoCube.io, Coinbase Global Inc., Compound Protocol, CoW DaO, DEFICHAIN FOUNDATION LTD., Goldfinch Technology Co., HydraDX.

COVID-19 Impact Analysis

Due to the COVID-19 pandemic and unstable economy, more people are showing interest in decentralized finance as a possible alternative to established banking institutions. Companies and individuals have resorted to DeFi platforms and utilized its lending, trading and borrowing capabilities to safeguard their financial future. Similar to conventional financial markets, the DeFi industry had higher volatility during the start of the epidemic. Due to investor reaction, the news concerning the pandemic's effects on the global economy caused significant price movements in cryptocurrencies and DeFi assets.

The trend towards remote work and dependence on digital technologies during the pandemic have expedited the adoption of decentralized banking systems. With the trend toward digitalization, DeFi systems provide remote access to financial services without the need for actual bank branches or middlemen. In the DeFi area, innovation has been spurred by the epidemic as developers strive to tackle novel difficulties and possibilities that have emerged from the crisis.

Russia-Ukraine War Impact Analysis

The geopolitical tensions between Russia and Ukraine lead to increased decentralized finance market volatility across all asset classes such as DeFi tokens and cryptocurrencies. Growing restrictions on DeFi and cryptocurrency platforms are implemented by governments and regulatory agencies in response to geopolitical events. Consumer's access to decentralized financial services and uptake of DeFi protocols are impacted by heightened regulatory scrutiny.

To safeguard their investments against currency devaluation, inflation or capital controls, more individuals turn to decentralized financial services as a result of the war's economic uncertainty. Increased user acceptance of DeFi systems and solutions might result from this. The functioning of DeFi platforms and services housed in the impacted areas impacted by the conflict's ability to interrupt internet infrastructure and connection in those locations. The robustness and continuity of decentralized finance operations need developers and users to put backup plans into place.

By Component

• Blockchain Technology
• Decentralized Applications (dApps)
• Smart Contracts
• Others

By Application

• Compliance & Identity
• Assets Tokenization
• Payments
• Marketplaces & Liquidity
• Decentralized Exchanges
• Data & Analytics
• Stablecoins
• Prediction Industry
• Others

By Region

• North America
  • U.S.
  • Canada
  • Mexico
• Europe
  • Germany
  • UK
  • France
  • Italy
  • Spain
  • Rest of Europe
• South America
  • Brazil
  • Argentina
  • Rest of South America
• Asia-Pacific
  • China
  • India
  • Japan
  • Australia
  • Rest of Asia-Pacific
• Middle East and Africa

Key Developments

• On May 17, 2022, S&P Global Ratings, part of S&P Global Inc. announced the formation of a new Decentralized Finance (DeFi) strategy group to advance S&P Global's approach to decentralized markets. S&P Global Ratings acknowledges that decentralized finance is progressively reshaping the capital markets, leading to a broadening range of market participants, the emergence of novel asset classes and the advancement of new functionalities in the execution of financial transactions.
• On May 23, 2022, CoinDCX, launched decentralized finance wallet Okto. It offers streamlined and secure access to DeFi services and has implemented AI-based multi-factor authentication to enhance security for self-custodial DeFi wallets.
• On July 16, 2021, Square built a decentralized finance business using bitcoin. The newly formed unit encompass the Seller, Cash App and recently acquired Tidal businesses. Decentralized finance, applications operate without dependence on centralized authorities such as banks, utilizing blockchain-based smart contracts to facilitate transactions. The majority of these applications are being developed on the Ethereum blockchain.

Why Purchase the Report?

• To visualize the global decentralized finance market segmentation based on component, application and region, as well as understand key commercial assets and players.
• Identify commercial opportunities by analyzing trends and co-development.
• Excel data sheet with numerous data points of decentralized finance market-level with all segments.
• PDF report consists of a comprehensive analysis after exhaustive qualitative interviews and an in-depth study.
• Product mapping available as excel consisting of key products of all the major players.

The global decentralized finance market report would provide approximately 54 tables, 49 figures and 197 Pages.

Target Audience 2024

• Manufacturers/ Buyers
• Industry Investors/Investment Bankers
• Research Professionals
• Emerging Companies