Over the years, blockchain technology has evolved from simply facilitating peer-to-peer money transfer to sophisticated functions such as decentralized finance (DeFi) and decentralized physical infrastructure network (DePIN).
DeFi comprises products that decentralize the traditional financial system, while DePIN enables the decentralization of physical infrastructure and other real-world products, blending the Web2 and Web3 ecosystems. Together, both innovations aim to bring everyone more organized structures and products.
This article delves into the intricacies of DeFi and DePIN for Web2 companies. It highlights the pivotal role CLS Global, a renowned crypto trading services provider, plays in supporting these initiatives.
DeFi and DePin: Drivers of Bringing More Organized Structures and Products
DeFi is an umbrella term that blends “decentralization” and “finance.” The idea behind the concept is to integrate services offered in the traditional financial sector into the blockchain ecosystem. Imagine applying for a loan on the blockchain or depositing your crypto holdings into a pool of funds for passive income. That’s precisely what DeFi brings to the table.
Banks or other centralized financial institutions operate as intermediaries between investors and the desired financial product in the traditional financial system. Underpinned by blockchain technology, DeFi projects change the narrative by allowing users to execute transactions by interacting with self-executing computer programs called smart contracts. The mechanics of the DeFi ecosystem give investors complete control of their funds.
The DeFi sector offers multiple products. These include borrowing and lending services, earning returns through yield farming, staking tokens to strengthen blockchain security, and more.
Decentralized Physical Infrastructure Network (DePIN), on the other hand, is an innovation that blends blockchain functionality into physical hardware, such as servers or networks. Instead of relying on a single entity, a network of participants helps to build, maintain, and run the infrastructure, making it more accessible, transparent, and distributed.
Essentially, DePIN enables physical infrastructures like real estate, solar panels and batteries for energy systems, hotspots and routers for wireless networks, or servers for cloud computing to be tokenized on the blockchain. Additionally, DePINs can operate as DeFi projects, allowing users to trade, borrow, lend, and stake tokens.
Based on their broad functionalities, DeFi and DePIN can potentially improve the global financial system, making financial services more accessible, reducing costs, and eliminating intermediaries. These innovations also enhance transparency and security, which are uncommon in today’s traditional financial system. Blockchain’s transparent record of transactions helps reduce fraud and build trust, while its decentralization makes systems less vulnerable to security attacks.
DeFi and DePIN offer users complete control and flexibility over their assets and transactions without relying on central authorities. They also foster innovation by supporting various financial activities and applications, leading to a more efficient economic system.
Benefits of DeFi and DePIN
Accessibility: They provide financial services to people who may not have access to traditional financial institutions due to geographical or regulatory limitations.
Lower Costs: Operational fees for blockchain-based projects are drastically reduced as intermediaries and central authorities are removed.
Increased Transparency: Although financial institutions may offer some transparency, blockchain technology ensures extensive transparency and verifiable transactions.
Enhanced Security: Decentralization offers better protection against hacks as there is no single point of failure.
Complete Control of Assets: Unlike financial companies that manage users’ money, DeFi and DePIN projects allow users to manage their assets completely.
Challenges of DeFi and DePIN
Regulatory Hurdles: As regulatory bodies globally are still figuring out how to regulate these new technologies, there exists a constant shift in rules and guidelines. This uncertainty can create challenges for users and developers as they struggle to comply with evolving crypto laws and regulations.
Technical Complexity: The technology can be complicated for users to understand and use. Overcoming the hurdle lies in each user’s effort to study and understand the blockchain realm.
Scalability Issues: Handling large transaction volumes can be challenging depending on the underlying blockchain network. Still, some blockchains have overcome this challenge through the proof of stake (PoS) consensus mechanism and other similar innovations.
Risk of total loss of funds: The decentralized nature of the blockchain makes it nearly impossible for investors to recover funds sent to the wrong wallet addresses. The same challenge applies when users prey to cyber exploits like phishing attacks.
Merging DeFi and DePin with Web2 Companies
Today, centralized entities own and operate the most prominent companies and projects. It means users rely on a single authority and remain vulnerable to a single point of failure. However, DeFi and DePIN sought to change the narrative. Both innovations aim to revolutionize how Web2 companies operate through their diverse functionalities. Here’s how.
As previously highlighted, DeFi brings decentralization into traditional finance (TradFi). It is possible to merge DeFi with Web2 companies, especially those specializing in TradFi, such as banks, hedge fund managers, brokerages, etc. Such a merger will allow customers of these Web2 firms to access DeFi functions like decentralized lending, borrowing, staking, and farming. Unlike most TradFi companies that impose high transaction fees, DeFi comes with minimal network fees, depending on the underlying network used.
Merging DePIN with Web2 companies can potentially profit users and any firm involved. DePIN inherently puts control of physical infrastructures in investors’ hands, giving them governance rights over the product(s) and bolstering transparency. Users are also rewarded with tokens for participating in DePIN projects, incentivizing more to join the ecosystem.
When traditional Web2 companies, like Tesla, Airbnb, and others, incorporate DePIN into their products, they automatically welcome millions of DeFi users into their ecosystem, potentially growing their user base and revenue stream.
Interestingly, adopting DeFi and DePIN into the traditional Web2 ecosystem can increase the number of crypto users and bring more profits to businesses that explore the idea. Let’s take a case study. In January 2024, the multinational asset manager BlackRock joined various financial companies that launched a spot Bitcoin exchange-traded fund (ETF), an investment vehicle that blends the traditional financial system with the leading cryptocurrency.
Following its listing in the United States financial market, BlackRock’s Bitcoin ETF saw massive inflows, skyrocketing the company’s assets under management (AUM) to $10.6 trillion. BlackRock’s stock also saw price increases.
BlackRock’s performance with the spot Bitcoin ETF shows that much good comes from tapping into blockchain technology. If Web2 companies adopt DeFi and DePIN into their ecosystem, the crypto and traditional financial markets will harmoniously grow due to increasing demand. At the same time, more investors unfamiliar with blockchain will be enlightened on how the technology works, leading to mainstream adoption.
CLS Global: The Missing Piece
Founded in 2017, Coin Liquidity Solutions (CLS) Global is a digital asset service provider specializing in market-making expertise and consultancy. Its CEO, Filipp Veselov, currently leads the company. The Dubai-based platform manages over $1.5 billion in assets to ensure project growth and market success.
CLS Global’s market-making entails the platform’s team guiding clients (crypto projects) to embrace advanced strategies to help them thrive in the crypto market. Its consultancy feature encompasses offering comprehensive knowledge to projects, giving them a hedge in the competitive digital asset industry.
Additionally, the firm funds new crypto projects through its venture arm, helping to fast-track the projects’ growth in the industry. CLS Global also helps its clients through all stages of development: idea stage, pre-launch, launch stage, and post-launch.
The platform boasts its services as an all-in-one package because its clients receive any or all of these services to push the clients to new frontiers. CLS Global’s website shows 500+ active clients and over a million attracted holders. It has also integrated with over 100 exchanges across the crypto industry. At press time, 10% of the top 200 projects within CLS Global’s ecosystem have secured listing on the price-tracking platform CoinMarketCap.
CLS Global positions itself as a top choice for those seeking to blend DeFi or DePIN with Web2 companies. The project has nearly a decade of experience in the digital asset industry, having weathered three bearish cycles and existed when both innovations launched in the crypto market. Additionally, decentralized projects are among CLS Global’s partners, showing its established history with the DeFi terrain.
Conclusion
CLS Global supports the integration of DeFi and DePIN into the Web2 ecosystem by offering market-making and consultancy services. With its expertise and support, businesses can enjoy enhanced transparency, security, and efficiency, driving innovation and growth in the digital asset industry.