Decentralized finance (DeFi) has been around for quite some time, allowing everyone to execute direct peer-to-peer trades with each other and giving users control over their finances, bypassing the traditional banking system altogether.

2021 was the year DeFi went from underground to mainstream, shattering records left and right, with wallets ballooning and the DeFi Pulse Index skyrocketing by 154%.

“2021 outperformed 2020 at every moment,” says the crew at ConsenSys.

And the numbers? From a cozy $9 billion in TVL (total value locked) to a whopping $179 billion by November 2021. But what’s fuelling this financial upheaval, and what market trends can we identify right now?

Keep reading to unlock the secrets of DeFi, and find out why analysts believe this will become a $18.28 billion financial ecosystem by 2027.

A $18.28B Advance Is Expected In Revenue Within The DeFi Market By 2027

The latest figures from Statista show that the DeFi market revenue will continue to see significant and steady increase year after year for the foreseeable future.

Revenue is expected to show an annual growth rate (CAGR 2024-2028) of 9.07%, resulting in a projected total of $37 billion by 2028.

In 2023, the market recorded $17.74 billion in revenue. This was a substantial increase (226.7%) from the winter conditions of the year prior which had seen only $5.43 billion.

Moving forward, however, 2024 is projected to record a 47.5% revenue increase to $26.15 billion. By 2025, this number is expected to grow to $31.54 billion, concluding the first half of this decade on a strong note.

Statista forecasts the following two years to be successful as well. 2026 is projected to see its revenue increase to $34.15 billion, followed by $36.02 billion in 2027. Therefore, between 2023 and 2027, DeFi market revenue is projected to rise to $18.28 billion, representing a 103% increase.

The average revenue per user in the DeFi market amounted to $1,064 in 2023. This year, the number is projected to rise to $1,378, and it could hit $1,650 by 2027.

Asked why there is such significant growth in the DeFi market, Vijay Marolia, the Managing Partner and Chief Investment Officer of Regal Point Capital and a money manager with over 20 years of capital markets experience, commented that inflation is the original motivation and it continues to be a major demand driver.  He added:

“But hidden fees, red tape, and time wasted are also reasons why DeFi solutions should continue to see growth.”

TradFi is working against itself, Marolia suggested.

the US Federal Reserve utilizes data that is too old, while dual mandates are self-defeating,
insurance companies are making many of their products unaffordable,
borrowing costs are up significantly across the board,
administrators are the fastest growing cost for organizations, and usually the least productive.

Meanwhile, Marolia said, “software continues to eat the world. Finance won’t escape it.”

Why is DeFi Growing So Fast?

According to Statista data, the DeFi sector is currently experiencing significant growth and innovation.Several factors are contributing to this, including:

increasing demand for DeFi services that are more accessible, transparent, and inclusive than traditional finance (TradFi),
individual’s and entity’s ability to create new financial instruments and services, thanks to blockchain’s programmability and flexibility,
the rise of decentralized exchanges (DEXs),
the emergence of yield farming,
the integration of non-fungible tokens (NFTs), enabling new ways to collateralize assets.

Per the analysts, the DeFi market will continue to grow. Major growth drivers include:

the ongoing development of new DeFi use cases and applications,
the increasing adoption of crypto by mainstream investors,
the continued emergence of new DeFi platforms and protocols.

Aaron Rafferty, the CEO of StandardDAO and Co-Founder of BattlePACs, a subsidiary of Standard DAO, stated that revenues in DeFi are predicated on asset transactions. He further noted that,

“Derivatives trading and asset tokenization are two products that are in their infancy still in crypto, however, with big institutional money coming into the space, these are the two areas that represent the biggest opportunity over the next 3 years.”

These are two of the biggest markets in the world and by comparison, their representation in DeFi is less than 1%. Exchanges like Coinbase are pushing hardest to bring – primarily US – users in, and now that they have a DeFi alternative, we should see significantly more inflow, Rafferty said.

95% More Americans Will Utilize The DeFi Market By 2027

The DeFi user increase will be seen globally – but not equally. The top 5 countries leading the race by 2027 will be the USA, the UK, Russia, Germany, and Canada, respectively.

From a global comparison perspective, the USA is projected to keep the throne over the next three years, doubling its 2023 DeFi user base.

More specifically, it will rise from 8,673,000 in 2023 to a whopping 16,920,000 in 2027. This is a 95% increase.

In 2024, the number of DeFi users in the US is predicted to rise to 12.53 million, followed by 14.99 million in 2025 and 16.15 million in 2026.

Though just one place behind the US, the UK’s user base is substantially smaller. In 2023, it saw 780,300 users. That said, among the top five countries, it is also projected to experience the highest jump. The number of DeFi users in the United Kingdom is predicted to jump 144% by 2027 to 1,904,000.

Commenting on the large gap between the UK and the US in the number of DeFi users, Ramy Bekhiet, Senior Advisor and Commercial Partnerships Coordinator at PDX, said, “a big contribution to that is the approval of the Bitcoin ETF and the upcoming approval of the Ethereum ETF around May/June” in the US.

Meanwhile, the next three countries on the list are close in numbers. Though having more modest user bases than the US, they are set to experience the same or larger ascent over the next three years.

The number of DeFi users in Russia will jump 95% between 2023 and 2027, from 717,500 to 1,399,000.

Germany is projected to see a rise from its 2023 number of 695,500 to 1,357,000 in 2027: a 95.1% jump.

Finally, Canada’s DeFi users will see their group balloon by 127.5%, going from 581,600 to 1,323,000.

In the DeFi market, users worldwide are expected to reach 21.83 million by 2027.

User penetration was 0.22% in 2023. It will be 0.25% in 2024 and is expected to hit 0.27% in 2026, where it will stay in 2027 as well, rising again in 2028 to 0.28%.

According to Vijay Marolia,

“As central banks around the world continue to lose the trust of their citizens, most of whom are struggling with inflation, demand for decentralized solutions will continue to grow. Regardless of the price of Bitcoin, blockchain technology is here to stay.”

Regulatory and Security Threats on the Horizon

It will likely not be smooth sailing for the DeFi over the next few years. Between 2023 and 2027, the market is expected to face significant challenges. These primarily include:

regulatory uncertainty
security concerns.

Bekhiet argued that,

“Security is a huge concern. Malicious actors eager to steal users’ funds can exploit smart contracts that have very weak coding by the development team.”

Per Vijay Marolia, “the federal government, regulators, and entities around the world will all try to legislate their way out of the problems they perceive.” But Mariola argues their attempt will be futile, saying: “Absent a shock to the electrical infrastructure, blockchain technology can’t be stopped.”

Conclusion

Revenue in the DeFi market is projected to reach $26.15 billion this year and $36.02 billion by 2027.

Therefore, between 2023 and 2027, DeFi market revenue is forecasted to advance by $18.28 billion. Meanwhile, the USA will maintain its position as the country with the most DeFi users globally.

Between 2023 and 2027, 95% more Americans will turn to DeFi solutions. The top 5 list includes the UK, Russia, Germany, and Canada.

Analysts have found that DeFi is currently experiencing significant growth and innovation.

The driving factors include the increased development of decentralized applications (dApps) and use cases, increasing demand for DeFi services, growing adoption of crypto by mainstream investors, the ability to create new financial instruments and services, blockchain’s programmability and flexibility, as well as DeFi’s enhanced accessibility, transparency, and inclusivity when compared to TradFi.

Meanwhile, regulatory uncertainty and security concerns could impact DeFi’s growth in the coming years. All that said, and given the continuing growth in the industry, as well as the upcoming Bitcoin halving which is almost certain to push the entire crypto industry upward, analysts expect clear skies ahead for DeFi.

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