DeFi has, without a doubt, been a growing topic of interest in crypto since the DeFi summer of 2020. And now, with the recent fall of FTX, coupled with numerous faults in both FinTech and CeFi, leading institutions are looking at DeFi to solve their challenges. In our latest Twitter Spaces, we talked with DeFi experts - Albert Chon, Co-founder & CTO of Injective; Thanh Lee, Founder & CEO of Coin98; and Mounir Benchemled, Founder & CEO of Paraswap, on how we are Transitioning the world to DeFi.
For everyone who missed the Live Twitter Spaces on Thursday, March 9th, we have summarized the top 5 key takeaways from the session. You can also listen to the entire live recording in the link below ⬇️
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Top 5 Key Takeaways
“I imagine a world in the future where you interact with DeFi, and you don’t feel the difference as to using any traditional FinTech or TradeFi application,” said Mounir from Paraswap when asked where the future of DeFi is going. Albert and Thanh agreed with his statement and said that UX, improvement of tools, and education are all key drivers to the mainstream adoption of DeFi products.
1. The value proposition of DeFi is only being appreciated now:
The first key takeaway was mentioned when the guests were asked about the various challenges seen in DeFi today. According to our guests, though numerous projects within the crypto space create robust solutions, DeFi was underappreciated until the fall of FTX. With the collapse, users started to understand that the convenience of centralization can come with severe consequences. Injective, Paraswap and Coin98 have all been dedicated and fully committed to decentralization to limit the risk for their users.
Albert from Injective went deeper into answering our question about challenges in the DeFi space. He mentions many challenges and problems when building in DeFi and maintaining a high-quality experience. A good UX, self-custody wallets, bridging, the latency of the blockchain, and gas are all elements users need to understand and developers need to create protocols around to ensure a frictionless onboarding. Another fundamental challenge on the technology side is to bridge Web2 services versus the blockchain concept. Nevertheless, all three guests are sure that through a lot of diligent engineering work, the gap between these challenges will shrink.
2. Traditional financial institutions are looking to DeFi to solve their challenges:
Before everything that happened in November 2022, many institutions showed interest in crypto. FinTechs and banks were conversing with mainly CeFi projects to see how they could trade via their infrastructures. This mindset shifted with the fall of FTX, leading to a rise in DeFi. Institutions started to come towards DeFi builders to understand their protocols and build with them.
Mounir, Thanh, and Albert all agreed that what institutions are looking for are twofold:
- Counterparty risk that is suppressed while using DeFi
- Instant settlement components - which is an upgrade of what already exists in TradeFi
With these in mind, institutions are taking these said elements to regulators with the intent to deploy DeFi as a large-scale pilot to their customers.
Mounir also referenced the irony of a viral crypto meme - Institutions are “coming.” He says, “What is different this time is that it is happening (institutions are coming), and this time there are people within big institutions using DeFi to take it to a larger scale configuration.”
3. The DeFi ecosystem needs more builders focused on network obstruction:
The conversation flows back to the seamless onboarding and UX of DeFi applications. Especially when it comes to a complex topic like DeFi and crypto, everything needs to be built to increase the attainability for real-world users to gain more market share. A dApp should be so simple to understand that even if one doesn’t know anything about DeFi, derivatives, or leverage, one should still be able to use the dApp.
In the future, builders must focus on bridging the gap between CeFi and DeFi and create network obstruction. Users should not be worried about which chain is underlying the dApp, and they don’t need to know all the details unless they want to. It should almost be a similar experience to “Google-ing”; you don’t necessarily know how the search appeared, but you know how to input what you are looking for.
4. User experience must be simplified before we consider onboarding the next millions of users:
Although some projects are pushing the limits and have seen immense growth in the DeFi space over the past years, onboarding is still a challenge. A topic such as wallet management is still very “heavy” for people to understand, and that is perhaps why DeFi doesn’t have millions of users yet. Similarly, it’s not just the users who need to gain a simplified understanding and suite of tools, but developers too.
Thanh goes on about this topic and makes several vital observations about the future of onboarding. He says; “The next protocols will need to serve millions of users, and that will be the tipping point of DeFi, and there will be a lot of capital flowing through crypto. However, user onboarding and wallet management is the first problem we need to solve before we start thinking about onboarding the next million users.”
5. Education, experimentation, and putting security at the forefront will mature DeFi to the next level:
Last but not least, we asked our guests where they see the evolution of DeFi going, given that it currently faces two significant challenges – lack of security and regulation.
Our guests agree the industry is on the road to maturity, with more best practices showcased across the ecosystem. Nevertheless, in the short-coming future, DeFi will continue to be in the experimental phase. Albert says there is an inherent tension between innovation and security that protocol builders must face when building. Thus, security will be top of mind.
Our guests go on to discuss the misconception that DeFi is safe because it’s non-custodial, but there are still a lot of tech risks that come with it. In the future, it would be good to see more standards on protocol and how it needs to be built. Builders can learn a lot and borrow many regulatory practices from traditional finance based on years of research.
To finish the topic on building and the risks around tech, Mounir also advises builders to put security first, no matter how tempting it is to launch a fast launch.
Finally, Thanh and our other two speakers reminded us of the importance of education. He said it's essential for users to be willing to learn about protecting their assets. “Besides asking the protocol to provide safety, we as users also need to take full responsibility for our safety through education and the risks levels when interacting with specific contracts and dApps.”
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Thanks again to your great panel of guests for such an insightful conversation. We host Roundtables and Live Podcasts via Twitter Spaces every week with great and inspiring people from all around the crypto space. If you want to ensure you don’t miss the next one, follow us on Twitter to set your next reminder.
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