The defi boom is only real on crypto twitter and in crypto telegrams. The average person still has no idea what it is, but they will. The biggest impediment on the space is that people need to truly understand the technology in order to understand how safe and effective it is. If you do understand the tech, you can see that it’s something that investors will not be able to ignore. It will take time for more and more investors to understand the space, and as that happens others will fall in line without needing to fully understand it. There are a couple things that will happen in the next 3 years that will cause defi to truly boom. (1) Lower transaction fees -> higher level of retail investment. (2) Better user interfaces for investors that are less tech-savvy. (3) High levels of institutional investment (this is the actual boom).
Institutional investment is when defi really takes off. The largest impediment to this is liquidity. Smaller retail investors are comfortable making investments in the thousands, but no institutional investor is comfortable making billions of dollars of investments with the current state of liquidity. The liquidity on Uniswap is only at four billion at the time of this writing. Most institutional investors are anxious about the liquidity of Bitcoin in general (which is at 647 billion market cap), so obviously we have a ways to go in the defi space. There are other impediments (i.e. lack of tech understanding), but liquidity is the real problem.
So how does defi get to a place where the liquidity is big enough that we see a real boom? The biggest answer is time. It simply takes time for that level of investments to come in as more and more people become acquainted with the space. Right now, the biggest impediment to this is transaction costs. Gas fees at the moment are getting to a point that is truly pushing retail investors away. So we are at an equilibrium where gas fees are to high for small cap investors and liquidity is too low for truly high cap investors. So mid cap retail investors will drive this ship for a few years (and will make a ton of money in the process). As transaction fees lower (dapps figure out how to leverage zkrollups, plasma, l2, etc.), more and more people will invest. Eventually ETH2.0 will drop, liquidity will rise exponentially, and we will see real institutional investment. Which dapps integrate l2 most effectively will probably win this race.
You should be excited, but this will take awhile.
