DeFi has the potential to become a robust parallel financial system, but to unlock this potential, it must cater to the needs of institutional players by developing first-class financial primitives.

This perspective, shared by Jesus Rodriguez, CEO of IntoTheBlock, highlights the importance of creating an infrastructure that can meet the rigorous requirements of large-scale institutions.

DeFi has the technical foundations to become a parallel financial system, but unlocking its potential will require first-class primitives for institutions and meeting their specific requirements, says @jrdothoughts.

Opinion. https://t.co/aJXpD6hyhP

— CoinDesk (@CoinDesk) September 3, 2024

In addition to these necessary developments, the gradual reduction of ETH held by the Ethereum Foundation (EF) is seen as a positive long-term move for the ecosystem.

Currently, the EF controls 0.23% of the total ETH supply. Over the coming decades, Rodriguez argues that reducing this figure closer to 0% would promote greater decentralization, strengthening the Ethereum network.

@drakefjustin: In the long term, the reduction in ETH held by the Ethereum Foundation is a good thing; EF currently controls 0.23% of the ETH supply, and it would be healthy for this figure to approach 0% over the coming decades as it promotes decentralization in the Ethereum…

— Wu Blockchain (@WuBlockchain) September 4, 2024

Looking ahead, Rodriguez is optimistic about the growth potential of existing DeFi sectors, projecting a 10x increase over the next five years. This growth is expected to be driven by several key areas:

1. Stablecoins: Rodriguez envisions a future where $1 trillion in stablecoins are in circulation, with a significant portion being decentralized. Stablecoins are likely to continue playing a crucial role in the DeFi ecosystem, offering a stable medium of exchange in a volatile market.

2. Decentralized Exchanges (DEXs): The ratio of DEX to centralized exchange (CEX) trading volume has been steadily increasing, a trend Rodriguez expects will continue. This shift reflects growing trust in decentralized platforms and the increasing demand for transparency and security.

3. Lending Markets: Platforms like AAVE and Compound are anticipated to grow tenfold, providing more efficient and accessible lending and borrowing options within the DeFi space.

4. Prediction Markets: Rodriguez also sees significant growth in prediction markets, with projects like Polymarket expected to expand by 10x, offering new avenues for decentralized betting and forecasting.

5. Derivatives: The availability of derivatives such as perpetual contracts, options, and futures with ample liquidity on Ethereum is expected to grow, providing more sophisticated financial instruments to Defi Users.

He believe that existing DeFi will see a 10x growth over the next five years:

1. Stablecoins: I hope to see $1 trillion in stablecoins, with a significant portion being decentralized.

2. DEX: The ratio of DEX to CEX trading volume is increasing, and I expect this trend to…

— Wu Blockchain (@WuBlockchain) September 4, 2024

As DeFi continues to evolve, these areas are likely to play a central role in its expansion, bringing the vision of a decentralized, parallel financial system closer to reality.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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