According to research conducted by blockchain analytics company Chainalysis, Argentina and Brazil are the Latin American countries where protocols for decentralized finance (DeFi) are most widely used. The two South American countries ranked 16th and 17th respectively in the global ranking 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 a higher adoption of these protocols per person. Unlike previous statistics, the total amount of funds deposited per nation was not a central factor in the development of this ranking.
The index gave each country a score from 0 to 1 (the highest score) based on several 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, in that order, ranked in the top 10.
Apart from Argentina and Brazil, there is no other Latin American country in the top 20 of the final list. Argentina scored 0.34, while Brazil scored 0.32
. The DeFi Adoption Index elaborated by Chainalysis places Argentina and Brazil among the top 20: Chainalysis https://blog.chainalysis.com/reports/2021-global-defi-adoption-index.
The Chainalysis text highlights that “while cryptocurrency adoption is generally higher in emerging markets, DeFi adoption is stronger in higher-income countries with substantial cryptocurrency usage, especially among traders and institutional investors”. This could indicate that cryptocurrency adoption at lower economic levels could be due to the need to hedge against inflation or the ability to send remittances more conveniently, the study adds.
More details on DeFi presented by Chainalysis
Decentralized finance, which according to CryptoNews’ Cryptopedia are financial services applications that are based on smart contracts, is “one of the biggest cryptocurrency developments in the last 1
8 months”, according to the Chainalysis study.
In this category, the research indicates, the best positioned countries in the index are those with the highest volumes of cryptocurrencies transferred, both currently and 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.
The evolution of the use of DeFi platforms divided by continents. Source: Chainalysis.
Also, data provided by the company indicates that, from April 2019 to June 2020, the vast majority of web traffic on DeFi protocols came from North America, although Western Europe added a considerable percentage in September 2019. From 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 indicates that large transactions dominate DeFi, which may indicate that they are “disproportionately popular with large investors.” Transactions of more than USD 10 million accounted for more than 60% of DeFi transactions in Q2 2021. In contrast, these amounts made up less than 50% of cryptocurrency trades in the same period.
Methodology used by Chainalysis
Regarding the method of data evaluation to come up with the DeFi adoption index, Chainalysis explained that three components were taken into account for the metric. The first was the on-chain cryptocurrency funds received by DeFi platforms compared to the PPP per capita (average income per capita). This reference serves to measure the total DeFi activity considering the purchasing power of a country’s inhabitants.
On the other hand, the total value of retail transactions (less than USD 10,000) in DeFi protocols, also measured with the average purchasing power of individuals; and individual deposits on DeFi platforms as a function of the number of internet users in each country were considered.
As a conclusion, the analytics company raises the question of whether the next few years will see DeFi see a similar pattern to that taken by the cryptocurrency market in general. This would include a greater adoption by the general population for tangible purposes that exceed speculation and in