Say it quietly, but DeFi isn’t so new or novel any more. At a certain point, a technology or movement loses the upstart tag and sets about the work required to become, well, part of the fabric of modern life. This is certainly true of DeFi, which emerged as a groundbreaking financial innovation several years ago and is now intent on becoming mainstream.
At its core, DeFi leverages blockchain technology to provide a broad array of peer-to-peer financial services, cutting intermediaries like banks out of the picture. Offering products such as loans, savings accounts, asset trading, and insurance, decentralized applications (dApps) depend on the security, speed, and decentralization of blockchain to put TradFi in the shade.
As the DeFi landscape continues to evolve, the market’s potential for growth is starting to turn heads: a recent Binance Research report suggests its market could hit a valuation of $231.2 billion by 2030, while market intelligence firm SkyQuest predicts an even more optimistic figure of $446bn by 2031. There are many factors feeding into such a bullish prognosis, not least the sheer proliferation of impactful financial dApps coming to market – and the influx of TradFi capital following the approval of spot BTC and ETH ETFs.
The fortunes of dApps are, of course, linked to the blockchains to which they’re anchored. Indeed, we have started to see DeFi-centric blockchains come to the fore, the sort designed to meet the unique needs of financial applications. One such example is Cosmos, which describes itself as “an ever-expanding ecosystem of interoperable and sovereign blockchain apps and services.”
Let’s take a closer look at why Cosmos’ architecture has made it one of the industry’s go-to DeFi blockchains.
Cosmos Appchains: The Everything Blockchain
Elon Musk famously said he wanted to turn Twitter into X, the “everything app.” Cosmos, in effect, can be seen as the everything blockchain: a blockchain for all seasons, all projects, and all use-cases.
In stark contrast to the siloed approach of most networks, Cosmos functions as an ecosystem of interconnected but unique Layer-1 chains known as interchains or Appchains. Its SDK, meanwhile, offers open-source and customizable modules that allow businesses to build diverse apps tailored to their specific requirements.
Cosmos’ Appchain architecture offers a host of benefits that make it particularly well-suited for DeFi applications. Not only can they seamlessly connect to multiple liquidity sources across different chains without fragmenting assets, but they benefit from Inter-Chain Security (ICS), in which the same quantity of validators active on Cosmos Hub are needed to validate transactions on the Appchain. They are also capable of handling up to 1,000 transactions per second (tps), making them more than equipped to process high-volume DeFi operations.
If the benefits stopped there, Cosmos would be seen as a top-tier DeFi chain. And yet there are other distinct advantages to building on the everything blockchain, from a high degree of customizability, interoperability (the Inter-Blockchain Communication protocol enables data authentication and transfer between any two Appchains), and network effect (over $2bn in TVL).
Little wonder Cosmos is home to a thriving DeFi ecosystem, including decentralized perpetual exchange Hyperliquid, the Cronos blockchain ecosystem, and cross-chain exchange protocol THORChain.
DeFi Leasing, Not Lending
One innovative project leveraging the power of Cosmos Appchains is Nolus, which has pioneered the concept of DeFi leasing. This unique proposition sets Nolus apart from traditional lending dApps by offering users access to finance of up to 150% on their initial investment – roughly three times the industry standard. What’s more, the cross-chain lease protocol lets them retain ownership of their assets.
Far from being all about loans (or leases, to be more specific), Nolus’ noncustodial suite enables customers to purchase, sell, swap, or stake their crypto assets. The protocol’s commitment to interoperability is also evident in its ability to connect to multiple liquidity sources across chains without fragmenting assets. What this means in simple terms is that asset swaps can be conducted on any integrated DEX, streamlining lending by eliminating the need for multiple pools.
Thanks to these attributes and others, Nolus has a significantly lower liquidation rate than contemporary money markets, making DeFi leases a much safer leverage option. By merging the boundaries between traditional finance (TradFi) and DeFi, the Appchains aims to help DeFi gain mainstream prominence.
As the DeFi ecosystem continues to expand, DeFi-centric blockchains like Cosmos and innovative protocols like Nolus are paving the way for a more efficient, secure, and accessible financial future. These advancements not only cater to the growing demand for DeFi’s trustless services but also push the boundaries of what’s possible in the world of finance.
Let’s just please stop with the “novel and new” talk, OK? DeFi is here to stay, and discussions should turn to how the global financial landscape will be transformed…