KuCoin's investment and research arm, KuCoin Labs, has suggested in its annual report that decentralized finance will be one of the key trends in the crypto industry in 2022, with governance through decentralized autonomous organizations (DAOs).
As criminal whales continue to plague the DeFi ecosystem, the risk of financial loss in the industry is becoming increasingly evident. That's why calls for regulating decentralized finance began to rise in 2021, and the industry has begun to face various legal sanctions over the past year. With DeFi on regulators' radar, KuCoin Labs thinks the industry may turn to DAO governance to mitigate legal risks.
“If DeFi wants to mitigate legal risks, DeFi governance will eventually turn to DAO.”
According to KuCoin Labs, a DAO that prioritizes community benefit can truly decentralize management. Therefore, the exchange predicts that we will see a shift in DeFi governance coordinated using different mechanisms.
KuCoin also considers the basic operating principles of DAOs to be reasonable enough to be used on the basis of legal entities. While the anticipated boom in the transition to DAO may not happen next year, redefining mechanisms could lay the groundwork for their adoption by companies and organizations, according to the report.
What is DeFi?
DeFi (or “decentralized finance”) is an inclusive term for financial services on public blockchains, primarily Ethereum. With DeFi, you can take advantage of many of the services supported by banks, such as earning interest, using loans, lending, purchasing insurance, derivatives swapping, and asset swapping. Plus, it's faster and there's no need to deal with paperwork or work with third parties. DeFi, as we are used to in crypto in general; It is global, peer-to-peer (meaning between two people directly without being routed through a centralized system), pseudonymous, and public.
DeFi offers an all-digital alternative to Wall Street by extending the idea of digital money, the core premise of Bitcoin. Moreover, in this alternative, there are no expenses such as offices, clearing houses, banker salaries. It has the potential to create more open, freer and fairer financial markets accessible to anyone with an internet connection.
What Are the Advantages of DeFi?
Open: You do not need to apply or “open” an account. Simply create a wallet for access.
Use of pseudonyms: You do not need to provide your name, e-mail address or any personal information.
Flexible: You can transfer your assets anytime, anywhere without the need for permission, waiting for long transfers and paying high fees.
Fast: Interest rates and rewards are usually updated quickly (every 15 seconds). These rates can be significantly higher than traditional rates on Wall Street.
Transparent: Anyone involved can see all transactions (private companies rarely offer this level of transparency)