Decentralized Finance (DeFi) Market Size, Share, Trends, Analysis and - Industry Growth | 2031 (2024)

Global Decentralized Finance (DeFi) Market size was valued at around USD 22 billion in 2022 and is poised to grow from USD 23.99 billion in 2023 to USD 48.02 billion by 2031, at a CAGR of 9.06% over the forecast period (2024–2031).

Decentralized finance (DeFi) offers financial instruments and is the largest option for brokerages, banks, and exchanges. Also, DeFi technologies allow consumers to borrow or lend money, speculate on asset price changes through derivatives, and trade crypto currencies. DeFi also provides risk insurance and assists consumers in earning interest on savings accounts. DeFi can be used to promote high-interest rates, among other things. The use of DeFi platforms increased efficiency, contributing to industrial growth. Because developers employ DeFi tokens for in-app purchases, an increase in e-sports and games has also been noticed as a significant driver for DeFi platforms. Additionally, trading games and collectibles are becoming popular block chain genres, allowing players to trade tokens and construct their ecosystem. For example, DeFi platforms like Augur let users trade on global events, sports, economics, and more.

Over the forecast period, the industry is expected to benefit from the advent of block chain-based prediction systems. The advantages offered by DeFi technology providers are moving the sector forward. The system abolishes the authority that financial institutions, especially banks, have over money, financial commodities, and financial services. Also, it eliminates the usage fees imposed on services by banks and other financial institutions. Furthermore, the simplicity of access is expected to enhance the use of DeFi platforms, as anyone with an internet connection can use it without authorization. The capacity to send money anywhere in the world, store money in Cryptocurrency wallets and trade tokenized versions of investments such as equities and mutual funds are all elements of the DeFi platform.

Market Snapshot - 2024–2031

Global decentralized finance (DeFi) market is segmented by component, application and region. By component, the market is segmented into smart contracts, decentralized applications (dApps), and block chain technology. By application, the market is segmented into tokenization of assets, compliance and identity, marketplaces and liquidity, payments, data & analytics, decentralized exchanges, prediction industry, stablecoins, and others. By region, the market is segmented into North America, Europe, Asia Pacific, Middle East and Africa, and Latin America.

Analysis by Component

In 2023, the blockchain technology segment led the global industry, accounting for more than 41.0% of total revenue. By cutting transaction costs, fostering distributed trust, and boosting decentralized platforms, blockchain technology has the potential to replace the existing decentralized business model underpinnings. Blockchain technology facilitates the establishment of more innovative, interoperable, decentralized, borderless, and transparent financial services in the financial sector.

The smart contracts market is expected to expand significantly throughout the forecast period. DeFi protocols and applications are built on smart contracts. A smart contract can act as a custodian, with rules governing when, how, and who can receive these assets. Furthermore, it accelerates decentralized financial processes like investing, lending, banking, and insurance. Additionally, centralized finance platforms can become decentralized via smart contracts, which is expected to open new potential for the segment's growth.

Analysis by Application

The data & analytics segment plays an important role in the market by providing detailed insights into economic activities. Platforms that offer data analytics services collect and analyze vast amounts of transactional data, enabling users to make informed decisions. Investors can monitor the performance of various assets, assess risk levels, and identify profitable opportunities based on real-time data.

The payments segment is expected to grow at the fastest rate over the projected period. The primary use case for the DeFi sector and the blockchain ecosystem is peer-to-peer payment. Using blockchain technology, users may securely and immediately exchange crypto currencies with one another, removing the need for intermediaries. Large financial institutions can benefit from DeFi payment systems by market infrastructure and better serving their wholesale and retail customers. It also encourages a more open economic structure for underbanked and unbanked groups.

North America posted the highest growth in the global decentralized finance (DeFi) market in 2023. This is due to the growing adoption of blockchain technology and smart contracts, underpinning many DeFi platforms. These platforms offer a range of financial services. The trend is changing as individual and organization types negotiate the transaction using financial instruments, enabling greater access to and control over their assets.

Meanwhile, Asia Pacific is considered the fastest-growing region during the forecast period. While the Asia-Pacific region saw an increase in DeFi adoption due to tech-savvy people, interest from governments in promoting financial inclusion and the possibility of more efficient cross-border payments.

Drivers

Rise of Blockchain Solutions is Driving the Market

• Blockchain technology provides a sophisticated and transparent environment for financial transactions. DeFi applications can use smart contracts to automate and enforce transactions without the need for an intermediary. Blockchain technology allows for interoperability between various DeFi protocols and applications. DeFi platforms can communicate and integrate with ease. This connectivity enables the configuration of the DeFi protocol, where developers can combine different building blocks to create innovative new economic products. DeFi operates on a public blockchain, accessible to anyone with an internet connection. This global access allows individuals to participate in financial activities without the need for a traditional bank account or credit history.

Rising Need for Decentralized Finance in Blockchain and Insurance 

• Increased demand for decentralized finance in blockchain and insurance will drive the worldwide decentralized finance (DeFi) sector forward. A surge in e-sports events and online gaming activities will drive up global market demand. Aside from that, an increased understanding of the numerous benefits offered by DeFi technology service providers will enhance the industrial landscape.

Restraints

Legal Uncertainty

• The decentralization of DeFi poses significant challenges for regulators around the world. Unlike traditional financial systems, DeFi operates without centralized authority, making it difficult to enforce existing financial rules. This legal uncertainty can deter institutional investors and elite adoption. Governments and regulatory agencies are still grappling with how to effectively regulate DeFi’s activities, which could lead to restrictive policies that impede market growth.

Security Vulnerabilities and Risks

• DeFi platforms are highly vulnerable to security vulnerabilities, including smart contract errors, hacking and fraud. DeFi's open-source projects mean that any flaws in code can be exploited by malicious people, causing huge financial losses to users. High-profile hacks and exploits steal millions of dollars already from DeFi platforms. These security concerns undermine user trust and pose a significant barrier to widespread adoption of the DeFi solution.

A strategic collaboration among market players has been identified in the Decentralized Finance (DeFi) market. For example, in March 2023, AllianceBlock focused on seamless connections between decentralized finance (DeFi) and traditional finance (TradFi) through its untrusted and decentralized services and partnered with ABO Digital, Alpha Blue Ocean's private digital asset finance arm. By utilizing AllianceBlock's decentralized blockchain infrastructure and the Nexera Protocol, traditional financial instruments can be tokenized, providing an avenue for capital providers who prefer not to hold digital assets to participate through traditional Actively Managed Certificates (AMCs).

Top Player’s Company Profiles

• Suffescom Solutions
• RisingMax
• BestWeb3Development
• IBM
• BestBlockchainDevs
• Accenture
• Tata Consultancy Services
• Cyberium Inc.
• Deloitte
• Develop Coins
• Bitdeal
• McKinsey & Company
• AktaryTech
• MarketAcross
• LevinRiegner
• Compound Labs, Inc.
• MakerDAO
• Aave
• Uniswap
• SushiSwap
• Curve Finance
• Synthetix
• Balancer
• Bancor Network
• Badger DAO

Recent Developments

• In May 2024, ConsenSys (startup company) indicated the inauguration of a pioneering R&D hub centered on decentralized finance. This facility aspires to augment both the adoption and the capabilities of DeFi applications. Collaborating with academic entities, industry stalwarts, and regulatory bodies, this endeavor aims to surmount challenges, ignite innovation, and advocate for the widespread assimilation of DeFi solutions in global financial arenas.

• In April 2024, Binance unveiled its DeFi accelerator programme, a venture designed to foster advancement and ingenuity within the decentralized finance sector. Through this initiative, Binance not only nurtures the creation and assimilation of promising DeFi projects but also amplifies the global dissemination of decentralized financial solutions by providing capital, technical assistance, and expert guidance.

• In October 2023, a partnership forged between Ozys and Kana Labs aims to transform the landscape of decentralized finance (DeFi). Both entities have revealed their strategic alliance, heralding a new era in the realm of DeFi.

• One of the issues with DeFi is balancing decentralization and efficiency. Centralized crypto currency exchanges, such as Coinbase, are efficient but lack decentralization. Decentralized exchanges (DEXs), on the other hand, allow crypto owners to engage directly without the use of a middleman. The market, which is dominated by Uniswap and Sushiswap, is expanding at a rapid pace. There was more DEX trading in the first two months of 2021 than in the preceding two years combined. The main driver of this expansion is automated market makers (AMMs), who create liquidity pools on DEXs where crypto asset holders lend their holdings in exchange for interest. AMMs are now used by 93% of DEXs.
• DeFi platforms generate their own tokens, known as governance tokens, which differ from traditional crypto currencies in that they grant holders voting rights on the DeFi protocol. Holders can vote on projects, and the value of their governance tokens will rise if their DeFi protocol acquires more users or a higher TVL. These tokens are at the heart of a larger ecosystem of decentralized crypto currency platforms known as decentralized autonomous organizations (DAOs).

SkyQuest’s ABIRAW (Advanced Business Intelligence, Research & Analysis Wing) is our Business Information Services team that Collects, Collates, Co-relates and Analyses the Data collected by means of Primary Exploratory Research backed by the robust Secondary Desk research.

According to our global decentralized finance (DeFi) market analysis, decentralized finance (DeFi) provides financial instruments and is the most popular choice for brokerages, banks, and exchanges. Also, DeFi technologies enable consumers to borrow or lend money, bet on asset price changes via derivatives, and trade crypto currencies. Block chain technology topped the global industry in 2022, accounting for more than 41.0% of total revenue. Block chain technology can replace the present decentralized business model fundamentals by lowering transaction costs, increasing distributed trust, and enhancing decentralized platforms. The data and analytics category will lead the global market in 2022, accounting for more than 18.0% of total revenue. DeFi protocols offer significant benefits in decision-making and data processing. By 2022, North America would have led the global industry, contributing to more than 35.0% of total revenue. The presence of major players such as Compound and Uniswap is due to their dominance. During the forecast period, Asia Pacific is expected to have the highest CAGR. This is due to Asia's tremendous economic expansion and rapid technological adoption.