©Reuters. 5 Obstacles to Widespread Adoption and How to Overcome Them
By Austin Kimm, Director of Strategy and Investments, Choise.com
Decentralized finance, or DeFi, is giving users more control over their finances than ever before, giving them new ways to lend, borrow, and receive income from their funds. In the DeFi world, there is no longer a need for centralized entities, no unnecessary fees are charged. Instead, users enjoy decentralized peer-to-peer platforms that ensure remittances and other financial transactions take minutes, not days.
And that’s not the distant future. That is now. DeFi services are already used by millions of people around the world. For example, as of May 2022, the total volume of the (CRYPTO:ETH) DeFi market was around $56.7 million. And that’s just Ethereum — the number doesn’t include competing chains like (CRYPTO:SOL) or (CRYPTO:DOT). According to Emergen Research, the DeFi market will reach $507.92 billion in April 2022-2028, mainly due to the development and adoption of DeFi platforms and protocols.
Despite the impressive stats, current market conditions suggest that several critical issues are inhibiting the widespread adoption of digital assets. Namely (1) incompatibility of DeFi and CeFi, (2) inability to recover funds, (3) risky returns with no guarantees, (4) unclear lending and borrowing mechanisms, and (5) limitations on trading options.
However, let’s turn to the projects trying to solve the problem of DeFi’s broader acceptance and examine them in detail.
Problem #1: Questionable Yield Schemes The most criticized DeFi feature is high-yield farming, borrowing, and staking. It is also used by regulators who intend to ban digital asset operations in their countries. The legislator applies the warning policy not only to users trying to test this feature, but also to platforms that do not provide their users with information about the amounts to be earned.
In this regard, the crypto industry needs yielding tools with clear interfaces and UX/UI adoption.
A nice example here is the Gnox platform. Every transaction on the platform is processed with a ten percent fee. Six percent of this fee goes directly to the DeFi Treasury platform, which then provides liquidity to various pools. A portion of the revenue from these pools is distributed to Gnox token holders based on the size of their holdings, providing them with additional passive income.
Problem #2: Seed Phrase Dependence Another problem to solve is the ability for users to get their money back if they lose their seed phrase. It should be taken for granted – we all forget passwords sometimes. Still only centralized wallets seem to offer various ways to verify and recover your account, which is inconvenient for people who wish to remain anonymous.
Timeless 1 Wallet is focused on providing DeFi users with an annual ROI of 10% or more without having to worry about traditional wallet issues like seed phrases. The wallet supports multiple assets including (CRYPTO:ETH) and Ethereum and offers staking and lending protocols. Developed by former Google developers, the wallet uses Google (NASDAQ:) Authenticator for security purposes instead of traditional wallet methods and offers 20% annual interest to its first million users.
Problem #3: High-risk lending and borrowing mechanisms When it comes to crypto, talking about lending and borrowing has never been easy. Especially after what happened with Celsius and what is happening nowadays. It’s always stressful to be in debt, but it’s even more stressful to stay in a volatile market where the amount of interest paid changes every minute.
Projects like the Hubble Protocol have the potential to change the way people work. The platform allows users to deposit assets like bitcoin in exchange for loans in the form of the platform’s USDH stablecoins with almost no interest on borrowing. The Hubble protocol also incentivizes users with its HBB governance token. Investors using $HBB earn 85% of the fees generated by transactions within the platform.
Problem #4: Incompatibility of DeFi and CeFi Both DeFi and CeFi have their pros and cons, but the truth is that many problems could go away if users could use both features at the same time.
Choise.com is an innovative project that combines the power of CeFi and DeFi in a format called MetaFi. Through such integrated options from Choise.com as MetaFi Charism platform, Crypterium wallet and subsequent CHO token, users enjoy a crypto bank, access to high-yield DeFi instruments, a single entry point to various DeFi protocols, simplified cross-chain bridges and easy entry or exit from centralized and decentralized services.
Problem #5: Limited Trading Opportunities
Even active traders and people willing to take risks are sometimes deprived of such opportunities due to lack of connections between different protocols in DeFi. High commissions, limited instruments, and leverage are common issues for new traders.
Through MarginFi, traders can manage their margins and risk across all Solana supported protocols and gain the ability to trade with leverage in areas where previously it was not possible. The solution provides users with a single area to manage all margins, streamlining the process and facilitating the distribution of their funds.
Conclusion
The above is not intended to promote projects that offer solutions, but rather to demonstrate the existence of alternative approaches to even the most complicated problems. Remember, if there isn’t a solution to the problem yet, that doesn’t mean there won’t be a solution in the future.
DeFi is the world of infinite possibilities that is still in its early stages of development compared to traditional finance. Therefore, it should invest more time and creativity in solving what seems to be a critical problem today.
© 2022 Benzinga.de. Benzinga does not provide investment advice. All rights reserved.
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