During this first wave of decentralized enterprise and financial services, users were more willing to share their money. This is very similar to how decentralized exchanges work, where it appears that comfort is more important than privacy and security at DeFi. The fact that some platforms offer high annual interest rates does not mean that anyone should give up control of their money.
Given that DeFi is designed with blockchain technology in mind, there is no need for middlemen, middlemen, or fees. Unfortunately, today all these aspects exist in many solutions. Unfortunately, users have to pay to deposit the money and then withdraw it again. Concepts like these will ultimately be a disaster for DeFi if the developers don’t tackle them soon.
Uniswap, which is currently the fourth largest Ethereum DeFi venture by total blocked value, shows how DeFi works, which is not a repository. DEX never has control over users’ funds – even when adding liquidity to trading pairs. Its disadvantage is that it is hampered by an Ethereum gas tax increase. Using Uniswap is very easy, but paying more than $ 20 to transfer and remit money is unacceptable.
Finally, DeFi’s ultimate goal is to allow cryptocurrency enthusiasts to generate passive income without contracts or platforms that accept money for safekeeping. This option is already under consideration in several projects, but there is room for further improvements.
Why DeFi needs peer-to-peer solutions
In today’s environment, interaction with decentralized economies relies on trust in smart contracts, which may require external audits. Unfortunately, this has resulted in an increase in the number of scams, scams, and projects plagued by hacks or other attacks. This makes the entire industry appear weak and unprofessional.
CipherTrace’s November 2020 report confirmed that half of the cryptocurrency hacks in 2020 were due to insecure or fraudulent DeFi protocols – an amazing development – but that people still continue to invest in unknown ventures. While stock markets are losing more money from decentralized financial projects, these statistics need rapid improvement.
Related: An Overview of Crypto Hackings, Exploits, and Theft in 2020
The ability to earn up to 12% negative interest from existing cryptocurrency holdings is much more attractive, especially when there are no money blocking periods, where you can get money from the solution at any time. This provides a smarter, safer, and more passive approach to using cryptocurrencies. While returns as high as 12% may seem insignificant compared to returns of up to 1000%, they carry less risk and less confidence. I know where to put my money.
Most importantly, this solution comes with the peer-to-peer market. Users who wish to place loan offers can choose from a number of options without requiring brokers’ approval. Combined with the platform approach to establishing insurance and protection funds, in addition to rigorous audits, this “second generation” DeFi protocol provides many benefits. Moreover, support for more digital assets should become the norm in decentralized finance.
Change LP and description of special tokens
A common trend in DeFi’s current landscape is liquidity insurance or liquidity protocol tokens. This concept is propagated by Uniswap and other automated market maker platforms. The main disadvantage is that users share two codes and their balance to provide liquidity.
For example, if someone wants to provide cash for Uniswap, then you need Ether (ETH) and Tether (USDT) or Dai, MKR, etc. For starters, this is a major hurdle that must be overcome. This condition of having the “correct parent” to participate in LP breeding will not last long. A new solution has to be found, and the LP will have a huge impact.
LP pooling ensures that users only need to own an “asset” of the liquidity pair to obtain liquidity. The smart contract can be matched with other users who have the corresponding resource. Creating a “blanket pool” to accommodate these users will significantly increase DeFi’s overall participation and reduce liquidity risk.
An added bonus is that LP Grouping gives users the right to earn compound interest on their parent assets and to earn their platform tokens. It is a strange concept that will make users more “loyal” to the chosen platform. This is definitely an option worth exploring for anyone serious about taking DeFi to the next level.