According to an investigation carried out by the blockchain analytics company Chainalysis, Argentina and Brazil are the Latin American countries where protocols for decentralized finance (DeFi) are used the most. The two South American countries were ranked 16th and 17th respectively in the world rankings led by the United States, Vietnam and Thailand.
According to the Chainalysis publication detailing the results of the study and its possible interpretations, the purpose of this «DeFi adoption index» is to know which countries have the highest adoption of these protocols per person . Unlike other statistics prepared previously, the total of funds deposited by nation was not a central factor for the elaboration of this ranking.
The index gave each country a rating from 0 to 1 (the highest score) based on various factors, such as the value of transactions and individual deposits compared to purchasing power. In addition to the United States, Vietnam and Thailand, China, the United Kingdom, India, the Netherlands, Canada, Ukraine and Poland were among the top 10 places , in that order.
Beyond Argentina and Brazil, there is no other Latin American country among the first 20 of the final list. The Rio de la Plata country achieved a score of 0.34, while Brazil added 0.32.
The text of Chainalysis highlights that «while the adoption of cryptocurrencies is generally higher in In emerging markets, DeFi adoption is strongest in higher income countries with substantial use of cryptocurrencies, especially among traders and institutional investors. This could indicate that the adoption of cryptocurrencies at the lowest economic levels could be due to the need to protect against inflation or the possibility of sending remittances more conveniently, the study adds.
More details about the DeFi presented by Chainalysis
Decentralized finance, which according to the CriptoNoticias Criptopedia are financial services applications that are based on smart contracts, are “one of the great events of cryptocurrencies in the last 18 months”, according to the study by Chainalysis.
In this area, the research indicates, the countries best positioned in the index are those with the highest volumes of transferred cryptocurrencies , both today as historically. Broadly speaking, these are “middle to high income countries or countries with already developed cryptocurrency markets”, particularly professionalized and institutional markets, such as the United States or the countries of the European Union.
Likewise, the data provided by the company indicates that, from April 2019 to June 2020, the vast majority of DeFi protocols web traffic came from North America , although Western Europe added a significant percentage in September 2019. Since June 2020, more traffic was seen from other regions, such as South and Central Asia . Despite including China, East Asian DeFi did not add as much traffic as centralized cryptocurrency services.
On the other hand, the data indicate that large transactions predominate in DeFi , which may indicate that they are “disproportionately popular with large investors.” Operations of more than USD 10 million represented more than 60% of DeFi transactions in the second quarter of 2021. Instead, these amounts constituted less than 50% of cryptocurrency operations in that same period.
Methodology used by Chainalysis
Regarding the data evaluation method to develop the DeFi adoption index , Chainalysis explained that three components were taken into account for the metric. The first was the cryptocurrency on-chain funds received by DeFi platforms compared to PPP per capita (average income per capita). This reference is used to measure the total DeFi activity considering the purchasing power of the inhabitants of a country.
On the other hand, the total value of retail operations (less than USD 10,000) in protocols were considered DeFi, also measured with the average purchasing power of people; and individual deposits on DeFi platforms based on the number of internet users in each country.
In conclusion, the analytics company raises the question of whether in the next years will see in the DeFi a similar pattern to the one that took the cryptocurrency market in general . This would include greater adoption by the general population for tangible purposes that exceed speculation and investment.
