Decentralized Finance (DeFi) is getting harder to ignore. It’s now responsible for locking in sums marching towards $200 billion and higher.
The total value locked (TVL) in DeFi has skyrocketed in the last year, and the number of new wallet addresses interacting with DeFi protocols increased by 65% in the first half of the year on one blockchain alone. Adding to these figures, MetaMask, arguably the most popular crypto wallet in DeFi, reported a little over 10 million active users in August 2021, and these user numbers represent an 1800% rise from 545,000 active users in 2020.
This is, by all means, explosive growth for DeFi, but the estimated number of users who own some form of cryptocurrency worldwide stands well north of 100 million people, and DeFi protocols are nowhere near logging this many participating addresses. One must conclude that the potential growth for DeFi is still nowhere near meeting its potential.
As a consequence, a wealth of market synergy lays dormant as the booming DeFi market waits to attract new users looking for the next place to make their biggest returns on investments. Therefore, it becomes increasingly necessary for projects to bridge the gap between DeFi and the holders of untapped capital.
How Copy-Trading Can Bring New Users to DeFi
Copy-trading has historically served as a way to educate new investors. It’s a powerful tool that allows users to follow the buys and sells of experienced traders in order to learn how markets work. However, copy-trading, in its current form, exists primarily as a centralized service, and this introduces several inefficiencies when applied to trading crypto.
A centralized copy-trading platform often operates off of the blockchain. By operating off-chain, these centralized platforms can juke the stats of their traders and charge hidden fees that eat away at an investor’s profits. On top of these fees, platforms often have users sign a contract for difference (CFD), which means users don’t own the crypto they are trading, but instead, the platform holds onto it for them.