Will It EVER Go Mainstream? In-Industry Experts Weigh In

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DeFi: Is it the future of finance? Or too volatile to become main­stream? A pan­el of experts gives us their thoughts.

The pan­el of experts didn’t all agree on the future direc­tion of DeFi. Some, like Ander­son Mccutcheon, the CEO and Founder of Chains.com isn’t feel­ing the vibe. “DeFi is head­ed down­ward. The future of retail finance lies with­in sys­tems that are reg­u­lat­ed, secure and pro­vide users with prod­ucts and ser­vices that they can eas­i­ly under­stand. The future and present for high-net-worth indi­vid­u­als (HNWI) and insti­tu­tion­al finance are with mul­ti-tril­lion dol­lar enti­ties that pow­er our econ­o­my today. Real mar­ket demand for DeFi is only going to shrink.” 

Oth­ers are more upbeat. Dmit­ry Tolok, VP of Growth and Co-Founder of Primex Finance. He thinks that DeFi will not only go main­stream but replace exist­ing finance.

“DeFi is head­ed to becom­ing the new stan­dard of how peo­ple exchange val­ue. The mis­sion of DeFi is to decen­tral­ize own­er­ship and elim­i­nate mid­dle­men. With more and more finan­cial prod­ucts mov­ing towards decen­tral­ized envi­ron­ments and the grow­ing sophis­ti­ca­tion of finan­cial use cas­es, it will even­tu­al­ly replace the major­i­ty of exist­ing finan­cial services.”

Asaf Naim is the CEO and Co-Founder at Kirobo. “As I see it, DeFi is like­ly to become ubiq­ui­tous in the com­ing decades once the issues of scal­a­bil­i­ty, usabil­i­ty, and secu­ri­ty have been addressed. At this time DeFi is used by a small num­ber of peo­ple who have in-depth knowl­edge and indeed the bar­ri­er to entry is high due to the knowl­edge required. It will take time for the indus­try to low­er the bar­ri­ers to entry and for DeFi to go main­stream.”

DeFi to gain traction

Eric Chen is the CEO and co-founder of Injec­tive Labs, core con­trib­u­tor to Injec­tive. “DeFi is con­tin­u­ing to gain major trac­tion from every­day users and insti­tu­tions despite the over­ar­ch­ing macro con­di­tions right now. The ini­tial iter­a­tion was large­ly focused on rel­a­tive­ly basic finan­cial prim­i­tives. How­ev­er, now we are wit­ness­ing a major expan­sion with­in the sec­tor in which more sophis­ti­cat­ed appli­ca­tions such as struc­tured prod­ucts are becom­ing increas­ing­ly commonplace.”

Chen says the next stage of DeFi evo­lu­tion will focus on embed­ding Web3 pow­ered prod­ucts into every­day appli­ca­tions. “For instance, you may see a main­stream app or web­site with fiat on-ramps but the back­end is entire­ly gov­erned by smart con­tracts. I fun­da­men­tal­ly believe that this is nec­es­sary in order to reach the mass­es who may not be famil­iar with the often com­pli­cat­ed cryp­to native prod­ucts. This is a major focus for Injec­tive now as well since many apps launched on top of Injec­tive such as Helix are cre­at­ing gate­ways to onboard every­day users and insti­tu­tions who may be new to crypto.”

DeFi Decentralized Frontends

Bear market problems

Diane Dai is the Co-Founder of DODO. “We are cur­rent­ly in a DeFi bear mar­ket, yet decen­tral­ized trad­ing users con­tin­ue to increase. It is an unstop­pable force on the eve of inno­va­tion. A lot of the val­ue has been iden­ti­fied but builders con­tin­ue to work hard and adop­tion con­tin­ues to expand. DeFi will absolute­ly be the future of finance but not in the way we cur­rent­ly know it. In the not-so-dis­tant future assets on the blockchain will become more diver­si­fied. Decen­tral­ized deriv­a­tives are one exam­ple of this. Trad­able assets will not stop with FTs and NFTs, this is just the begin­ning. Assets per­tain­ing to iden­ti­ty, the meta­verse and Game­Fi are being cre­at­ed right now in Web3 and this space will be mind-blowing.” 

Dai says that while there is a great deal of volatil­i­ty in DeFi right now, it will not always be this way. “When some­thing is new, it is often volatile, but over time it lev­els out. In the way that some peo­ple pre­fer an apple over an orange, some peo­ple will always pre­fer tra­di­tion­al finance over DeFi. How­ev­er, the ser­vice that blockchain offers will allow it to become more and more main­stream and always have val­ue. One day it will not be as volatile and that will mean that the val­ue has all been dis­cov­ered. This is not just about finan­cials, it is a cul­tur­al par­a­digm shift.”

Resilient in the face of harsh macroeconomics

Julian Koh is the CEO and Co-Founder of Rib­bon Finance. “DeFi has proven to be extreme­ly resilient in the recent mar­ket down­turn. While many CeFi plat­forms like Cel­cius and Voy­ager went bust, all the major DeFi plat­forms like AAVE and Com­pound were still intact and worked per­fect­ly. This is large­ly due to the trans­par­ent col­lat­er­al­iza­tion mech­a­nisms and the immutable nature of blockchain and also show­cas­es the poten­tial of DeFi to become the back­bone of finance in the future. “

Koh says CeFi isn’t the same as DeFi, and more peo­ple need to realise this. “More peo­ple also need to under­stand that hacks, exploits, and scams aren’t all that DeFi has to offer. They don’t have to take crazy risks or do giga­brain degen plays, and just uti­lize exist­ing finan­cial strate­gies such as cov­ered calls for exam­ple, but enjoy the automa­tion and own­er­ship which DeFi provides.”

Zen (Zhen Yu) Yong is the CEO of Web3Auth. “One of the fun­da­men­tal core aspects of DeFi is self-cus­to­di­al own­er­ship of assets. The recent implo­sion of CeFi plat­forms such as Voy­ager and Cel­sius, and sub­se­quent freez­ing of user assets high­light the impor­tance of deal­ing with account cen­sor­ship and restric­tion to access.”

Yong says peo­ple think decen­tral­iza­tion isn’t impor­tant until they real­ize some­one else can just deny them access to their own deposits with cen­tral­ized providers. “DeFi is here to stay but volatil­i­ty isn’t the main road­block to main­stream adop­tion – acces­si­bil­i­ty, edu­ca­tion, improv­ing of UI, UX and secu­ri­ty is. Builders need to make it sim­pler and safer to access and adopt DeFi. There’s been about $545M worth of dig­i­tal assets lost from users for­get­ting their seed phras­es and oth­er sil­ly mis­takes. But that doesn’t have to be the norm when you can secure­ly man­age keys through dis­trib­uted mod­ules only acces­si­ble to the right­ful owners.”

DeFi lightbulb moment

Ahmed Al-Bal­aghi is the CEO and Co-founder of Bicon­o­my. “There is a clear inter­est and invest­ment in build­ing Decen­tral­ized Finance (DeFi) as the future of finance, one with­out inter­me­di­aries and gate­keep­ers. We see more insti­tu­tions hav­ing that light-bulb moment as they ven­ture into DeFi. There are road­blocks, how­ev­er, with the volatil­i­ty of cryp­tocur­ren­cies receiv­ing a lot of atten­tion but this is a short-term con­cern. Large funds and insti­tu­tions will project over the long term. Right now, the prob­lems inter­act­ing with DeFi dApps remain. It doesn’t mat­ter if the price is sta­ble if you can’t get your invest­ments mov­ing quick­ly. Insti­tu­tions, for exam­ple, care about com­pli­ance, secu­ri­ty, and ease-of-use.”

Al-Bal­aghi says the future suc­cess of DeFi real­ly lies in mak­ing it as easy to use as our favorite apps. “No one wants to see the nuts and bolts of the tech, which we are expe­ri­enc­ing now. They want to take con­trol of their assets and mon­ey. Decen­tral­ized finance is work­ing towards trans­ac­tions that are done sim­ply through a few prompts and the user doesn’t even know what chain they are work­ing on because their dApps will be able to send trans­ac­tions across dif­fer­ent chains with­out issue. DeFi is head­ed towards being a stan­dard, an every­day occur­rence that lives in your pock­et and you don’t think twice about.”

Creativity is the Lifeblood of why Audiences will Care About Web3

DeFi vs CeFi

Jane Ma is the co-founder of zklend. “DeFi and CeFi live on a con­tin­u­um. Rather than view­ing DeFi as a com­plete re-engi­neer­ing of exist­ing finan­cial sys­tems, one can see it as an improve­ment focused around cen­sor­ship resis­tance, trans­paren­cy and per­mis­sion­less­ness through blockchain technology.”

Ma says the future of finance will con­tin­ue along this spec­trum. “These fun­da­men­tal con­cepts of DeFi will live on, and prod­ucts will con­tin­ue to evolve to adapt to main­stream pref­er­ences in the years or even decades to come. The adop­tion of insti­tu­tion­al DeFi in the past year alone by play­ers such as Gold­man Sachs, JP Mor­gan or the intro­duc­tion of insti­tu­tion­al DeFi pro­to­cols exem­pli­fy such a grad­ual, yet unde­ni­able, shift. Like with ear­ly-stage com­pa­nies or finan­cial inno­va­tions, as prod­ucts, oper­a­tions and mar­kets mature, volatil­i­ty will also decrease, ulti­mate­ly reach­ing a more sta­ble equi­lib­ri­um. The ques­tion on main­stream adop­tion is not if, but when.”

An interesting space

Matias Dor­ta is the CEO of Asset­Dash. “DeFi is in an inter­est­ing space. First and fore­most, I believe DeFi has proven its use-case since the ini­tial launch dur­ing ‘DeFi Sum­mer.’ We now have many mul­ti-bil­lion dol­lar lend­ing pro­to­cols, Uniswap is doing vol­umes on par with Coin­base, and DeFi is now extend­ing to the world of NFTs with Bend­Dao and JPEG. DeFi also proved to be more resilient than many of its CeFi coun­ter­parts dur­ing the bear mar­ket. The foun­da­tion for con­tin­ued growth is there and should be accel­er­at­ed with improve­ments in gov­er­nance and UX.”

Dor­ta says DeFi will be the future of finance to a cer­tain degree. “I don’t think all forms of tra­di­tion­al finance will cease to exist. How­ev­er, forms of tra­di­tion­al finance will start lever­ag­ing DeFi. We are already see­ing that today with prod­ucts such as Com­pound Trea­sury that allows intu­itions to gen­er­ate yield in DeFi. You may start to see real estate con­tracts, cer­tain bonds, etc. on-chain. DeFi and CeFi will start blend­ing in a way and users will use both with­out even notic­ing. I do see a world where cer­tain sub­sets of the pop­u­la­tion most­ly rely on DeFi-relat­ed prod­ucts. In areas with less bank­ing, cryp­to wal­lets are becom­ing the alter­na­tive. I believe we see this trend accel­er­ate in emerg­ing markets.”

Dor­ta says that DeFi is not too volatile to become main­stream, but clear gov­ern­ment reg­u­la­tions would help. “I also don’t think gov­ern­ment reg­u­la­tions are the ‘end all be all’ for the future of DeFi. The beau­ty of decen­tral­ized sys­tems is they can exist with­out the per­mis­sion of any sin­gle enti­ty. How­ev­er, a cat­a­lyst for main­stream adop­tion would be gov­ern­ment clar­i­ty and this would also reduce volatility.”

DeFi: Is it the future of finance? Or too volatile to become mainstream? A panel of experts gives us their thoughts.

Volatility due to size

Simon Fur­long is the Co-Founder of Geode. He doesn’t think any­one can know whether DeFi is the future of finance with any true degree of cer­tain­ty, since the next big thing could be just around the cor­ner. “How­ev­er, if things con­tin­ue on their cur­rent tra­jec­to­ry, I think it’s a safe assump­tion that Web3 will con­tin­ue to gain a foothold in the indus­try, and our cul­ture as a whole. There’s a strong aura of change sur­round­ing the per­cep­tion of decen­tral­ized finance, and the younger gen­er­a­tions gen­er­al­ly embrace it wholeheartedly.” 

DeFi may not be the only future

Fur­long says it’s hard to say if it’s the only future of finance. “I would be inclined to say no. The incum­bent finan­cial sys­tem birthed many pow­er­ful orga­ni­za­tions, with vast amounts of resources, and many of them are not on board for a decen­tral­ized future. I would say it’s most like­ly going to be one aspect of our finan­cial future, exist­ing along­side pri­va­tized, and more tra­di­tion­al sys­tems. In my eyes the largest hur­dle is reg­u­la­tion, since it is cer­tain that gov­ern­ments the world over will only roll out more leg­is­la­tion regard­ing DeFi and cryp­tocur­ren­cies as a whole.”

Fur­long says that volatil­i­ty is some­thing that impacts any finan­cial sys­tem under a cer­tain size. “It takes very lit­tle to spook retail lev­el spec­u­la­tive investors, and when that’s the entire­ty of your mar­ket par­tic­i­pants, the price can change wild­ly at any moment. Con­cur­rent­ly, it also works to entice new par­tic­i­pants – pos­i­tive news can eas­i­ly sky­rock­et prices and return incred­i­ble prof­its for investors who were will­ing to take the chance. How­ev­er, once insti­tu­tion­al investors start enter­ing the mar­ket, reg­u­la­tion begins to take hold, etc., this is when you end up with a mature mar­ket that’s much less volatile.”

The cryp­to win­ter will not last for­ev­er, so let’s watch this space when the big thaw hits.

Got some­thing to say about DeFi in the cryp­to win­ter or any­thing else? Write to us or join the dis­cus­sion in our Telegram chan­nel. You can also catch us on Tik Tok, Face­book, or Twit­ter.

Disclaimer

All the infor­ma­tion con­tained on our web­site is pub­lished in good faith and for gen­er­al infor­ma­tion pur­pos­es only. Any action the read­er takes upon the infor­ma­tion found on our web­site is strict­ly at their own risk.



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