DeFi is ready for takeoff

By Elitsa TaskovaFrom Nexo

The rising star in decentralized finance…

Since its inception, Cryptocurrency Planet orbited the financial world in an extremely irregular orbit.

In gutter, bright glow. Aphelion is the only place where a blink is rarely recorded.

There were numerous reports about its impending implosion in mainstream media. They described it as an unstable blackhole sucking in the unaware.

Recent events have not damaged the reputation for cryptocurrency. However… there are strong reasons to believe that the star of Decentralized Finance (DeFi) is rising.

Financial attractiveness cannot be “DeFi”.

First, let’s understand that crypto-companies (such as FTX and 3AC) can be very volatile. The same reasons that traditional financial institutions failed were the reason why crypto companies (such as FTX, 3AC, etc.) crashed to the ground: control was too concentrated and risk management was poor.

DeFi, on the other hand, is built using a completely different set standards. Its basic principle is that anyone should have access to financial services in an anonymous and permissionless manner. This trusts predictable code that runs on a foundational Blockchain layer rather than individual decisions.

As your digital assets remain in your control, they can be stored in digital wallets rather than traditional bank accounts. Also, and this is the key – there isn’t a financial service provider or gatekeeper. The non-hierarchical nature decentralized organizations makes it impossible for them to collapse in a similar fashion as the centralized ones.

DeFi is able to reduce or eliminate the fees associated with traditional financial operations, as there are no middlemen who charge a fee to hold your assets.

CeFi as a starting point to future missions

All of this is great and all, but trust is what financial services need to thrive. This often translates into “regulation.” Not surprisingly, regulation has been reintroduced after the collapse of several cryptocurrency companies. Jean-Paul Servais (new head of the International Organization of Securities Commissions, a global securities watchdog), said that the regulatory model could be replicated from existing structures in other sectors, making it easier for them to implement.

The European Union’s New Markets in Crypto-Assets Framework (MiCA) could provide a solid foundation for international guidance. It is one of the first attempts to establish a comprehensive set regulations for cryptocurrency markets.

All this and more BothThere is still a need to encourage DeFi and centralized financial service providers to adopt cryptocurrency to advance. This is because centralized platforms are well-equipped on regulatory compliance and offer easy-to-use access points into the blockchain.

DeFi brought down to Earth

For those who are not familiar with cryptosphere, barriers to entry include accessibility, ease of use, lack of understanding, and cost-effectiveness.

Non-custodial options have always struggled to balance usability and safety, since the loss of the seed phrase could result in permanent asset loss. There are some non-custodial wallets available that allow wallet recovery in case of lost private keys, but they still have small but controversial keynotes.

Gas fees have been a growing concern given the high cost of Ethereum and network congestion. The solutions are close to emerging mechanisms like transaction aggregation or the option to pay gas with coins that aren’t native to the related blockchain.

Smart contracts are another important feature of the cryptocurrency world. However, their potential is only beginning to emerge. Smart contracts offer a revolutionary way to not only improve control over customers’ digital assets, but also the possibility to store and manage an autonomous identity on-chain. This allows users to avoid having to entrust their data to large tech companies.

Make a standard orbit

DeFi’s technology is sound. It will eventually solve real problems and create a democratic, inclusive financial ecosystem.

DeFi, contrary to what some may say, will help crypto settle into a predictable orbit. DeFi is a financial product that allows people to take care of their own finances. End users will have the option to choose between centralization and decentralization once we reach this milestone in cryptospace flight.

Thereafter, “per aspera astra”.