I love Defi and the whole concept and idea around it. The fact that everyone can have credit not based on what a bank, credit company, or corporation says but just on the base of a smart, permission less, decentralized contract anywhere in the world no matter what is just fascinating. Now Defi is here to stay and with the big mainstream push of Bitcoin a lot of the early adopters think that decentralize finance is next but I think is not ready for prime time yet for the following reasons:
Is still heavily unregulated
With crypto being more mainstream is only a matter of time till the government puts its foot down and starts laying down more strict rules. I don’t think they will succeed in everything since it will be like playing a game of wack-a-mole but some type of regulations will be implemented. Now that is just in the monetary aspect of cryptocurrency as an asset or currency. When it comes to defi is a whole different ball game.
Smart contracts are not something that politicians will understand so once they don’t they may try to shut it down thinking is a danger to the public. Although is more than likely people will understand more over the years but if governments are just getting into Facebook, google, amazon and bitcoin don’t expect they will get into defi anytime soon.
Flash Loans Hacks & Security
I will be totally honest I hate flash loans and what they bring to defi. It’s just a way to exploit the market and so far we have seen that with many hacks, from akropolis, harvest, bzx, and pickle finance we have seen many headlines of users and protocols lose millions of dollars due to a flash loan attack or exploitatio
n on a bug. This brings a lot of insecurity in the space and it does not entice big or small investors to get in. There is a risk to everything but for a small market like decentralized finance is now, this hurts more than the opportunities that it has.
But you have to think. If the banks gets robbed or shuts down (Depends on the country) you will probably get your money back via insurance or maybe the government would step in. But if a protocol or app gets shut down, you’re out of luck. But as the platforms evolve and the insurance in defi is growing this could make some changes but so far there is a lots of platform that may give a you return or better loans but can still be very insecure.
The complexity of it.
Right now the defi space is only growing and making traditional banks look like ancient dinosaurs. Having that said with all the new technologies and platform appearing every day is a bit hard to keep up and understand all the basics. Yes, there are simple protocols and apps such as Alpha, Uniswap, and others but try to explain a 65-year-old how Metamask works. This will change eventually but for now, we are still a bunch of early adopters trying to figure it out ourselves. Going to a bank might seem inconvenient but is way simpler for many than trying to get a loan on Maker
Defi is here and it’s not going anywhere but we should also be very careful thinking that with the rise of bitcoin people are just going to be flocking borrowing protocols. I feel that the space will keep evolving and as it does more people will come forward but for now its a marathon and not a quick race.
Originally published on publish0x profile.
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