Chicago DeFi Alliance Launches to Save Decentralized Finance

Amid the apparent ongoing collapse in decentralized finance (DeFi) lending, a group of major trading and cryptocurrency companies in the United States are launching an alliance to support the sector.

Introduced on April 7, the Chicago DeFi Alliance (CDA) aims to provide DeFi-focused startups and entrepreneurs with support and guidance in complying with trading regulations and other applicable requirements.

Chicago DeFi Alliance to share its expertise to boost DeFi liquidity and markets

According to a blog post by crypto fund Volt Capital, a founding member the CDA initiative, the alliance also includes major brokerage firm TD Ameritrade, crypto investment firms CMT Digital, DeFi startup Compound Finance, Chicago trading shop DV Trading, Cumberland DRW, and financial services firm Arca.

Specifically, the CDA will support all-stage startups in crypto finance, including market makers, liquidity, product feedback, professionalized traders, and talent.

Providing startups with expertise and “real world” trading feedback, the Chicago DeFi Alliance plans to help them improve liquidity, tap new talent and traders, as well as comply with regulatory requirements.

The initiative also revealed that the first cohort of startups includes DeFi protocol DyDx and Yield. Within their partnership with the CDA, the startups will be sourcing liquidity and onboard new traders.

What is DeFi?

As reported by Cointelegraph, decentralized finance, or DeFi, combines the implementation of major crypto-associated tools like digital assets, smart contracts and blockchain-based decentralized applications in financial services such as credit and lending.

The DeFi industry has been growing in recent years, with DeFi markets hitting $1 billion in February 2020, surging over 70% from $276 million in February 2019.

As the world economy reacted to the coronavirus crisis, DeFi markets subsequently collapsed to $360 million in the total value on April 5, according to analytics site Defipulse.com.

MakerDAO — the largest application in Ethereum's DeFi ecosystem — has been experiencing some major issues since March. As reported by Cointelegraph, MakerDAO’s decentralized protocol was left with millions of dollars in debt from under-collateralized lending after Ether prices dropped 30% in 24 hours on March 12.