This post is a set of observations on the current state of DeFi based on the past few years of experience in engaging with several projects. In a nut shell, today’s DeFi will not survive in future, if it were to ever scale and become mainstream. We have a good starting point, a lot of enthusiastic developers and strong small community as cheerleaders but DeFi that will work for masses will be very different from what it is today and unfortunately, many of today’s DeFi projects will not survive – so be careful before yolo’ing into them.
Here are some dimensions for DeFi projects to think about:
1) **Need to over index on managing risk for users, not just the protocol** \- the current DeFi is over indexed on managing protocol risk and that’s not illogical. If the protocol does not survive, there is no future for them :). But, in a decentralized world where there is no government or insurance to protect users, DeFi will need to up the game, beyond cyber security. In fact, the future DeFi will be over indexed on managing risk for users as a foundational requirement. There is no survival for DeFi where users get liquidated in market volatility without being able to have a solve for it (beyond just repaying the borrowed amount). Difficult problem to solve but nothing easy ever makes big.
2) **Need to build a better bridge between FIAT and Crypto** \- it’s a nightmare to use DeFi protocols currently. Transfer FIAT on centralized exchange, buy some token there, transfer to some DEX, swap it for the token you want to use for DeFi then go to the DeFi portal and do some stuff. WTF! This needs to change. Services like Alchemy Pay, Flexa etc. need to be better integrated into DeFi protocol to build the FIAT-Crypto bridge and smoothen the experience.
3) **More compliance and intelligence about the projects/tokens on the DeFi platform itself** \- right now, it’s non existent but it needs to be there for more confident lending, borrowing, staking etc. This will boost confidence and also drive more participation in DeFi activities from broader set of people and institutions.
There are certainly more to this topic that what I have covered above but I plan to continue to build on this and develop a more comprehensive perspective in the coming months. If you are interested in that, please ping me separately. If you want to collaborate, even better – let me know. If you want to fund/sponsor – even even better – please let me know :).
I couldn’t be more excited about a future where DeFi is the new TradFi – where we are not controlled by banks, agencies and centralized non-profits but we have work to do, a ton of it. Good news, WGMI! Shout out to all the developers and hustlers who are trying to build the DeFi today – WGMI with you all!