Revolutionizing Financial Services: The Shift to DeFi

-Centralized exchanges have been the popular choice due to the mismanagement and fraud that has occurred in the past.
-The move to DeFi will require a better user experience in order to make it more accessible to new users.
-In order to make DeFi more viable, developers must create products that are as familiar and easy-to-use as the best web2 analogs.

The past year has seen a seismic shift in the world of cryptocurrency, with an increased focus on decentralized finance (DeFi). This shift is in part due to the gross mismanagement, opacity, and outright fraud that has been seen in many centralized exchanges over the past few years. People are now turning back to the core tenets of crypto, such as decentralization, self-custody, transparency, and censorship resistance, and this has led to a surge in DeFi adoption.

Despite the potential of DeFi, there are still a number of challenges that need to be addressed before it can truly become a viable alternative to centralized services. One of these is the user experience (UX) issue. Bitcoin.com’s Head of Product Experience, Alex Knight, has explained the problems and solutions of the UX challenges in web3 applications. In essence, the self-custodial web3 model leads to a user experience that is fundamentally different from the one people are used to in the custodial web2 model, and this can create significant friction.

In order to make DeFi more accessible to new users, developers must create products that offer the same level of familiarity and ease-of-use as the best web2 analogs. This requires clever design, education, and incentives. For example, Bitcoin.com has long-provided an intuitive experience with its self-custodial multichain wallet app, but it is only suitable for simple actions such as buying, selling, sending, and receiving crypto. In order to make DeFi more viable, developers must build upon this by integrating more complex DeFi features, such as decentralized exchanges, liquidity pools, and yield farming.

In addition to UX challenges, DeFi also needs to significantly improve its performance when compared to centralized services. This includes reducing transaction fees, increasing transaction throughput, and improving scalability. To do this, developers must focus on developing more efficient consensus algorithms, such as proof-of-stake or zk-SNARKs, and on developing infrastructure such as layer two solutions.

Finally, the shift to DeFi must be expedited in order to truly capitalize on its potential. To do this, the cryptocurrency industry must continue to make DeFi more accessible to new users and improve its performance. If these challenges can be addressed, then DeFi could truly become a viable alternative to centralized services and revolutionize the way we interact with financial services.