Decentralized finance has the potential to bring revolutionary ease and security to financial transactions through the use of blockchain technology. And with its ability to introduce a unified and standardized system across the world, DeFi can open up new financial opportunities to those who may not have had them before.
However, like much of the crypto industry, DeFi struggles with prevailing ignorance of its structure and capabilities, as well as widespread skepticism about its reliability and reach. Below, 14 members of Cointelegraph Innovation Circle share ways DeFi pioneers can help build the industry’s credibility and reach.
Focus on consumer protection
DeFi must focus on consumer protection if it wants to gain adoption and credibility. New concepts and terminology pose obstacles. Notice of changes in terms, rates or yields must be communicated clearly and often to customers. Mimicking existing traditional industry behaviors will be very helpful to regulators and lawmakers who are still trying to define terms like “blockchain.” – Chris Groshong, CoinStructive, Inc.
Moving towards cross-chain communication
DeFi has gained momentum by providing users with decentralized alternatives to products offered by traditional banks and financial companies. Cross-chain communication is the next frontier in DeFi, allowing users to leverage multiple protocols across multiple chains to unlock more advanced use cases and strategies. Along with this, some DeFi protocols will begin making their offerings compatible with enterprise backend systems, enabling a more streamlined user experience to help onboard the next generation of users. – Adelyn Zhou, Chain Link Laboratories
Guarantee the confidentiality of transactions
DeFi needs more privacy to build credibility and gain further adoption, especially in the traditional financial world. In the TradFi industry, 99% of transactions are private; conversely, 99% of DeFi transactions are public. If the TradFi world is ever to begin deploying significant capital into DeFi, then it will need transactional privacy to protect business intelligence and preserve user privacy. – Warren Paul Anderson, Discreet laboratories
Talk about strong APYs
DeFi adoption comes down to two main things: trust and yield. When investors invest their money in DeFi protocols, they look for solid, risk-adjusted returns. For DeFi to attract more investors, the industry must convince users that the annual percentage returns they offer outweigh the risks of the protocol. – Ty Smith, Coinbound
Invest in education
The most important issue in adoption is education. Explaining complex topics is difficult and expensive. Investing in education is the best way to increase and maintain adoption. In terms of credibility, the best way to build it is to provide concrete examples of how the technology has a real use case and to explain the problem the projects are trying to solve in a relevant way. – Dennis Wohlfarth, ACCOINTING.com
Share stories from leading investors
As DeFi becomes adopted by more real-world individuals, it will undoubtedly gain more trust and adoption. Shark tank Kevin O’Leary is a perfect example. O’Leary has evangelized DeFi and owns part of WonderFi. Once people realize that through DeFi they can access the immense advantage that banks and their shareholders have had for years, the tide of adoption will turn. – Ben Knaus, Scholar
Work for better transparency and easier navigation
In terms of credibility, it is essential to emphasize transparency. Blockchains are completely transparent, while crypto companies are anything but. This leads to many cases of market abuse, such as insider trading, front running, wash trading, non-disclosure of conflicts of interest, deceptive marketing, etc., which endanger the integrity of the market. Adoption can also be driven by simplification. Currently, DeFi is still in its early stages; it’s reminiscent of the web before search engines were invented, or plain text websites before markup languages were designed. Simplified SDKs are expected to be a significant driver of adoption, allowing non-technical users to not only better navigate, but also extract maximum value from different protocols. – Amber Ghaddar, AllianceBloc
Drawing analogies with CeFi services
One of the biggest barriers to adopting DeFi is that it seems too complicated. While there are many DeFi applications that offer entirely new services that centralized finance does not offer, many are designed to be a decentralized replacement for the CeFi tools we are all very familiar with. The DeFi community should focus on simplifying its tools and drawing analogies to similar CeFi tools, then focus on articulating the nuanced benefits of DeFi. – Dan Novaes, WIN NETWORK
Working towards strong and sustainable returns
Increased adoption of DeFi will be accompanied by clear communication of benefits and good, secure returns. Incredibly high yields and rates look great, but they attract the attention of more cautious investors who will understand that they are clearly unsustainable. Good and sustainable returns will help DeFi move from being an innovator and early adopter to the early majority. – Rob Dawson, ConsenSys
Do more to prevent major hacks
The benefits of DeFi can often exceed those of traditional finance. However, trust in DeFi projects is still low. In the first quarter of 2022, 97% of all crypto scams originated from DeFi protocols. The industry must do more to prevent major hacks and build trust. Additionally, DeFi is a difficult topic for most to understand. Further education on the topic is needed, which will lead to further adoption. – Shiran Herzberg, eToro
Simplifying and demystifying the industry
As long as DeFi remains surrounded by complexity, it will remain a space benefiting a limited number of people. To promote inclusive adoption, working to reduce a legacy and a troubled atmosphere is essential. For example, high fees are often a surprise to those trying DeFi for the first time. Projects that aim to simplify DeFi – with transparency – are promoters of the industry’s credibility. – Alexander Lutskevych, CEX.IO
Adhere to regulatory guidelines
Create solutions that comply with regulatory guidelines and work within already existing legislative frameworks. DeFi doesn’t change what we do; it changes the way we do things. Understand that trusted companies can still create, operate, manage, and provide a safe space for users using DeFi-focused technology to ensure that consumers and businesses do not live on the wrong side of government surveillance. – John Wingate, BankSocial
Collaborate with (but don’t get sucked into) TradFi
The credibility and adoption of DeFi will continue to grow over time as long as those pushing it forward stick to the philosophy that got them here. Collaboration with TradFi is essential to the long-term success of the industry as a whole; However, I believe we should not be afraid to chart our own course rather than taking the easy way out and merging with existing players. – Sheraz Ahmed, STORM Partners
Continue to innovate
We continue to innovate, create new ideas and build new technologies. Everyone here in the industry is what moves this industry forward, and in due time, DeFi will receive the credibility and adoption it deserves. – Brent Xu, Ume
This article was published by Cointelegraph Innovation Circle, a vetted organization of senior blockchain technology executives and industry experts who are building the future through the power of connections, collaboration and thought leadership. The opinions expressed do not necessarily reflect those of Cointelegraph.