- DeFi has exceptional features and functions to create a better experience and service for internet users.
- Some problems affecting it include lending, cross-chain interoperability, and capital efficiency.
- Experts say these problems mitigate its mass adoption.
DeFi, is central to the future of the internet. It uses the crypto and blockchain revolution to shape the digital economy. Experts say it is born out of problems with traditional finance and seeks to create a better user experience.
Unfortunately, about 1.7 million people across the globe do not have access to financial services. These services include real-time transactions, loans, and deposit schemes. There is also the problem of mobility and administrative bottlenecks in accessing centralized financial services.
It is on this premise that this tech was launched.
DeFi creates a decentralized financial institution for service providers to ease customers’ financial experience.
Additionally, it enables open access for everyone on the internet while facilitating wider income opportunities. With its open-source protocols, it improves transparency and intuitive customer service experience.
There are no regulations or government bodies deciding how its protocols should operate.
However, with all the innovations and the ease with which these protocols are rolling out, experts say it (still) has a long way to go.
DeFi Receives Unprecedented Growth
DeFi has achieved unprecedented growth since its mainstream adoption. This is evident in the number of protocols available online today.
However, experts and industry players assert that it still has a long way to go before mass adoption.
One of those areas that need improvement is DeFi lending. This function has some issues that users can not overlook.
You would recall that traditional banks have unsecured loans for their customers to borrow money. These banks give out money based on creditworthiness without locking up the borrower’s assets.
Furthermore, in this case, most protocols that offer lending lock up a part of your asset to access the feature. They lack the framework or solution for how credit-based or non-collateralized loans would work in a permissionless decentralized environment.
DeFi protocols that offer collateralized lending and borrowing often lack utility for all digital asset classes. They usually support only top-tier tokens like Bitcoin and Ethereum as collateral. So if you offer other relatively unknown tokens as collateral, some protocols will not recognize them.
Its Application Stats
The Decentralized Finance ecosystem is performing beyond expectations. As of November 2022, 384 DeFi applications and 125 offer lending and borrowing.
However, several issues, such as lending problems, cross-chain interoperability, and capital efficiency, still characterize this tech. Experts, therefore, say these issues should be solved before it gets mass adoption.
Furthermore, if DeFi can properly work with decentralized AMMs, it will solve many problems.
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