How Decentralized Finance (DeFi) Is growing in Eastern Europe

2024 brought about a lot of change for Decentralized Finance (DeFi). We saw its total value climbing into the billions, $100 billion to be precise. This meant that financial services became more accessible. Eastern Europe has been the major player in this revolution. A significant 3% came about from its business DeFi activities.

How is DeFi Used in Eastern Europe?

Financial services have embraced DeFi by channeling the service through blockchain technology. This means they can still provide the same services without the need for a formal banking system. This is what reduces the cost of transactions making them much faster and accessible.

Eastern Europe is also number 4 in the world’s cryptocurrency market. Meaning crypto is no stranger to them. Think of it, the region had more than $4.5 billion worth of transactions between June 2022 and June 2023. This achievement was accomplished even with the Russia-Ukraine war in the midst, bringing the 3% growth from CEE countries.

There are a few key factors that caused this amazing transition:

• Institutional investors found themselves wanting a piece of this cake. On the other hand, individuals enjoyed the convenience and steadily chose it as an option.
• The restrictions on Russian users also meant people had to use local platforms. This meant blockchain became more popular in Poland and Ukraine as well.
• Eastern Europe has also found herself having to align to EU rules, resulting in the rapid growth of DeFi.

Popular Cryptocurrencies

All thanks to popular digital currencies such as Bitcoin and Ethereum, Eastern Europe has seen growth in DeFi. The system eliminates third parties while also providing the necessary security. These transactions are also liquid and stable.

Newer currencies such as Solana and Polkadot haven’t taken the back seat as they are also steadily growing. This is all thanks to their use being interoperable and scalable. Blockchain solutions are also the major driver when it comes to DeFi apps. They have become the ultimate solution in ensuring more transactions can be performed across different networks.

Here are some popular cryptocurrencies used for DeFi services in Eastern Europe:

• Binance Coin (BNB) has low transaction costs and fast processing times. This means it is also one of the best solutions for Defi applications.
• Solana (SOL) is also known for its scalability and fast transaction speeds.
• Polkadot (DOT) an excellent tech solution that can be used for defi services. It’s nature also means it can be used across different blockchains.
• Avalanche (AVAX) provides low latency and high throughput, making it an excellent platform for building a decentralized application.
• Cardano (ADA) is one known to focus on sustainability and security.

Technological Innovation Causing a Shift

The strong tech environment in Eastern Europe has been a key player in the growth of DeFi. Countries such as Romania and Poland have also managed to attract global investment to establish further research and development centers. This has meant these countries can use their local talent, especially those that have a STEM background, to work in these centers.

There’s also been a rise in venture capital investments, especially in Lithuania and Estonia. This is all due to the countries strongs start up community. This has meant startups such as Shard Labs in Croatia and DeCenter in Serbia have seen major success. These are some of the blockchain technology companies that have created a new decentralized financial solution.

Opportunities for More Financial Inclusion

As more users embrace DeFi services, financial options are becoming easier and simpler. The DeFi market in Eastern Europe is also estimated to grow at 8.2% annually from 2024 to 2028. This means the market volume will be set at $1,580 million by 2028. On the other end revenue is expected to grow to $1,151 million, with an average revenue of $1,681 for individual users.

By 2028 more users are expected to join the trend with a projected increase of up 772,800 people joining. This means user penetration is expected to increase from 0.28% in 2024 to 0.32% in 2028.

What Challenges Does Eastern Europe Face When Pushing the Growth of Decentralized Finance?

There are numerous challenges that are limiting DeFi’s growth. Below are some of the challenges that are causing stunted growth in the decentralized finance system.

1.Regulatory Uncertainty

One of the limitations that have prevented DeFi from expanding as expected in Eastern Europe is the regulatory landscape. The lack of clear guidelines and set laws has made the business have fewer investors. Unsurprisingly, investors are hesitant to switch to DeFi because of the uncertainty caused by regulatory issues. The EU’s markets in Crypto-Assets (MiCA) regulation, while comprehensive, does not directly address DeFi.

2. Market Saturation and Innovation Stagnation

There is a saturation of services in the Eastern European DeFi market with many protocols offering similar functions. To succeed, DeFi projects need to stand out by providing innovative solutions.

3. Infrastructure and Talent Gaps

Many Eastern European countries do not have the latest in digital infrastructure with the addition of a shortage of skilled professionals. This is especially true in the field of blockchain technology. These gaps can slow down the development and implementation of new DeFi solutions.

4. Integration of Real-World Assets (RWA)

Tokenizing real-world assets is something that may pose many challenges for DeFi technology. This is compounded through regulatory uncertainties and the complex process of merging RWAs into DeFi protocols.

Conclusion

The interest in DeFi is on the rise in Eastern European countries and this indicates a move towards more accessible and fair financial services. This trend is set to reduce financial inequalities in the region by involving more people in the economy.