As the DeFi market experiences monstrous growth, the biggest is somewhat unbelievably still yet to come. This continued level of growth through 2021 would see the total value locked in DeFi protocols, which is currently sitting at over $38b according to DeFi Pulse, rise to over a trillion dollars by year’s end.
Decentralized finance is still in its nascent stages; the opportunity for growth is unlike much we have ever witnessed since before the traditional financial institutions we know and don’t really love came to exist. But as crypto traders dive into new and highly profitable opportunities and transaction numbers balloon to a size that threatens to tear the Ethereum network apart at the seams, investors from the traditional markets can largely only watch and marvel at the returns that are available by means of decentralized exchanges, liquidity mining, and borrowing and lending protocols.
“DeFi will eat JP Morgan” according to crypto research and analytics firm Messari, but before it can do so, there’s baggage that comes alongside DeFi’s promise to change the face of global finance that needs to be addressed. The complicated mechanics and game-theory behind these trailblazing protocols is beyond the reach of the masses, with the technicalities of DeFi meaning that the vast majority of traditional and mainstream investors end up lost when looking for the best platforms and protocols to use.
Impermanent loss, which is a liquidity provider’s temporary loss of funds due to volatility in a trading pair, is just one of the many complicated terms that befuddles newcomers to the DeFi space. There’s a pretty steep learning curve as users navigate their way through the world of decentralized finance protocols and, coupled with the dizzying array of product choice, smart contract exploits and straight up scam projects and it’s pretty undeniable that a lot of people will need varying degrees of hand-holding if DeFi is to become truly utilised by the mass markets.
The innovations of DeFi need the user experiences of CeFi
The blinding speeds of innovation in the DeFi space means that advances in technology often outpace the equally important improvements in user experience, which only adds a barrier to entry and a hurdle to learning. DeFi is no different from the centralized financial industry in this sense, as users need access to both quality education and products that simplify otherwise complicated financial instruments if they are to understand and come to trust a platform with their hard earned money.
Various projects and platforms are putting considerable effort into simplifying the overall user experience in DeFi – Yearn Finance’s yVaults did well at lowering the barrier for yield farming across a variety of crypto-assets, and other projects such as Compound provide decentralized financial services more recognised by the everyday investor such as lending and collateralized loans.
Another promising addition to the space is the DAOventures. The platform, which has an upcoming token sale launching on Polkastarter on February 15th, offers users a mainstream-friendly way to benefit from the best aggregated DeFi strategies in one spot. By minimizing the requirement for constant monitoring of asset performance across multiple protocols by means of an easy to use dashboard and toolset, products such as DAOventures platform look to make using DeFi products less of a headache and more of an experience akin to that of high street platforms.
Offering mainstream market-friendly financial products and services is ultimately still the missing ingredient in the already explosive Defi mixture. In order to expand the reach of decentralized financial products and make a global impact, DeFi’s pioneering protocols need to work at providing low barrier on-ramps to people across the world no matter their investing experience level, age or technical ability.