Cryptocurrencies have constructed a digital “clone” of the conventional financial world.
The Decentralized Autonomous Organization and Credit Platform industry groups represent 13.7% and 13.2% of the sector’s market capitalization. This idea is here to stay, as seen by the exponential growth of trading tokens and money trapped in smart contracts in its ecosystem. According to Debank, DeFi is now locked with a net worth of over $60.5 billion.
Decentralized crypto, synthetic stock markets, quick and affordable access to finance are all features of DeFi initiatives on the blockchain network. Some DeFi projects, like Uniswap, have developed into effective worldwide financial marketplaces that serve individuals and institutions because of their decentralized character. In addition, DeFi also eliminates intermediaries and enables cheaper and more effective financial services.
On the retail side, it is improbable to think that the typical retail investor would comprehend the risk profile of even the most straightforward DeFi products. I have yet to hear a convincing justification for why the typical retail investor would require access to exotic financial derivatives. UX/UI issues furthermore hamper retail adoption.Technology has the potential to save billions of dollars by reducing transaction costs and boosting business efficiency.
There isn't much choice except to mandate people lock up excess cash, diminishing the value of taking out these positions until a decentralized reputation system is built. Even after/if reputation problems are resolved, the underlying positions' volatility may continue to favor over-collateralization.Since the bulk of existing DeFi solutions is built on top of the Ethereum network, the success of DeFi is reliant on its scalability and usability.