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, standardized system across the globe, DeFi can open up new financial opportunities to those who may not have had them before.
As with much of the crypto industry, however, DeFi struggles with both prevailing ignorance of its structure and capabilities, as well as widespread skepticism about its trustworthiness and scope. 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 needs to focus on consumer protection if it wants to gain adoption and credibility. New concepts and terminology are roadblocks. Notice of changes in terms, rates or yields should be communicated to customers clearly and often. Mimicking the behaviors of the existing traditional industry will go a long way with regulators and legislators who are still trying to define terms like “blockchain.” – Chris Groshong, CoinStructive, Inc.
Move toward cross-chain communication
DeFi has gained momentum by providing users with decentralized alternatives to the products offered by traditional banks and finance firms. Cross-chain communication is DeFi’s next frontier, enabling users to leverage multiple protocols across many 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 simplified user experience to help onboard the next generation of users. – Adelyn Zhou, Chainlink Labs
Ensure transactional privacy
DeFi needs more privacy to build credibility and garner more adoption, especially among 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 going to start deploying significant capital into DeFi, then it’s going to need transactional privacy to protect business intelligence and maintain user privacy. – Warren Paul Anderson, Discreet Labs
Talk about strong APYs
DeFi adoption boils down to two main things: trust and yield. When investors are putting their money into DeFi protocols, they are looking for strong, risk-adjusted returns. For DeFi to attract more investors, the industry needs to convince users that the annual percentage yields they are offering outweigh the risks of the protocol. – Ty Smith, Coinbound
Invest in education
The most significant pain point in adoption is education. Explaining complex topics is challenging and expensive. Investing in education is the best way to grow adoption and sustain it. In terms of credibility, the best way to build it is by providing concrete examples of how the technology has a real use case and explaining the problem that projects are trying to solve in a relatable way. – Dennis Wohlfarth, ACCOINTING.com
Share the stories of high-profile investors
As DeFi is adopted by more public-facing individuals from the real world, it will undoubtedly garner more trust and adoption. Shark Tank’s Kevin O’Leary is a perfect example of this. O’Leary has been evangelizing DeFi and owns part of WonderFi. Once people realize that, through DeFi, they can access the immense upside that banks and their shareholders have had for years, tides of adoption will turn. – Ben Knaus, Sch0lar
Work toward better transparency and easier navigation
In terms of credibility, a focus on transparency is essential. Blockchains are fully transparent, while crypto businesses are anything but. This leads to many cases of market abuse, such as insider trading, front running, wash trading, nondisclosure of conflicts of interest, misleading marketing and more, which puts market integrity at risk. Adoption can also be boosted through simplification. Currently, DeFi is still in its early stages; it is reminiscent of the Web before search engines were invented, or websites in plain text before markup languages were devised. Simplified software development kits should be a big driver in adoption, allowing non-tech users to not only better navigate but extract maximum value from the various protocols. – Amber Ghaddar, AllianceBlock
Draw analogies to CeFi services
One of DeFi’s biggest adoption hurdles is that it sounds overly complicated. While there are many DeFi apps that offer brand-new services that centralized finance doesn’t, many are designed as decentralized replacements for CeFi tools we’re all very familiar with. The DeFi community should focus on simplifying its tools and draw analogies to similar CeFi tools, then focus on articulating DeFi’s nuanced benefits. – Dan Novaes, EARNFT NETWORK
Work toward solid, sustainable returns
Increased adoption for DeFi will come with clear communication of the benefits and good, safe yields. The amazing high yields and rates look great but stand out to more cautious investors who will understand that they clearly are not sustainable. Good, sustainable returns will help DeFi to move from the innovators and early adopters into the early majority. – Rob Dawson, ConsenSys
Do more to prevent major hacks
DeFi’s benefits can often outweigh those of traditional finance. However, trust in DeFi projects is still low. In the first quarter of 2022, 97% of all crypto scams were from DeFi protocols. The industry needs to do more to prevent major hacks and build trust. Additionally, DeFi is a difficult topic to understand for most. More education on the topic is needed, which will lead to further adoption. – Shiran Herzberg, eToro
Simplify and demystify the industry
As long as DeFi remains shrouded in complexity, it will remain a space with benefit to a limited few. To promote inclusive adoption, working to diminish a legacy, murky vibe is paramount. For example, high fees often come as a surprise kick to those trying DeFi for the first time. Projects that work on simplifying DeFi — with transparency — are promoters of industry credibility. – Oleksandr Lutskevych, CEX.IO
Adhere to regulatory guidance
Build solutions that adhere to regulatory guidance, and work within legislative frameworks that already exist. DeFi doesn’t change what we’re doing; it changes how we do it. Understand that trusted companies can still build, manage, run and provide a safe space for users using DeFi-focused tech to ensure that consumers and companies aren’t living on the wrong side of government oversight. – John Wingate, BankSocial
Collaborate with (but don’t be absorbed by) TradFi
Credibility and adoption in DeFi will continue to grow over time as long as those driving it forward stick to the philosophy that has brought them this far. Collaboration with TradFi is essential for the long-term success of the industry as a whole; however, I believe that we should not be afraid to carve our own path rather than take the easy route and merge with the existing players. – Sheraz Ahmed, STORM Partners
Keep on innovating
We keep innovating, creating new ideas and building new technologies. Everyone here in the industry is what drives this industry forward, and in due time, DeFi will receive the credibility and adoption it deserves. – Brent Xu, Umee
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.