DeFi mass adoption is so close, but so far. According to Antoine Loth, Valk’s CEO, we are moving from a confusing boutique financial product to mass adoption.
In the 1990s, the Internet was still in its infancy and only a fraction of the world’s population had access to it. Today, crypto and blockchain technology are at a similar stage of development. While there has been much excitement and speculation about the potential of these technologies, mass adoption is yet to come.
In fact, the total value locked in DeFi (decentralized finance) protocols is only around $60 billion, which is less than 6% of the total $1 trillion crypto market cap. Furthermore, there are only 4.8 million DeFi wallets, which is a far cry from the billions of people in traditional banking systems.
Several obstacles, including confusing wallet setups, industry jargon, and the difficulty of tracking multiple positions, have prevented DeFi from achieving mass adoption.
However, there is reason to believe that this will change in the coming years, especially in a post-merge era for applications and DeFi. As educational resources become more widely available and user-friendly applications are developed, we believe that more and more people will start using DeFi protocols. When this happens, the industry will reach a tipping point where mass adoption will become a reality.
DeFi Mass Adoption: Intimidating onboarding
For a crypto native, setting up a wallet may not seem like a big deal. However, for someone new to this field, this can be a daunting task. The long hexadecimal addresses, “gas fees,” and other confusing terminology can be enough to turn someone away before they even get started. While tools like MetaMask have simplified the process of creating and managing wallets, there is still a need for user-friendly applications that allow new users to easily manage multiple accounts and positions.
Aside from the challenges surrounding wallets, another major obstacle preventing DeFi adoption is the industry’s use of jargon. For example, terms like “yield farming,” “liquidity pools,” and “decentralized exchanges” (DEXs) can be confusing to those unfamiliar with the space.
This confusion is compounded by the fact that there is often more than one meaning for each term. For example, “yield farming” can refer to providing liquidity to a DEX, staking assets on a lending protocol, or a variety of other things.
Additionally, actually running DeFi protocols can be difficult. There are many different protocols to choose from, each with their own set of rules and procedures. For example, lending on Aave/Compound, staking on Lido Finance, or providing liquidity on Uniswap or Curve require different actions. Even after you understand what these actions do, it can be difficult to keep track of multiple positions.
DeFi Mass Adoption: Tool gaps remain
People often describe two different types of traders in the stock market: retail and institutional. Retail traders are individuals who trade for themselves, while institutional traders are organizations that generally trade on behalf of others.
In the traditional financial system, there is a clear division between these two groups. For example, retail investors have less capital than institutional investors, giving the latter a major advantage. In addition, institutional investors have access to better information and research, as well as more sophisticated trading tools. As a result, it is often very difficult for retail traders to compete with institutional investors.
However, in DeFi, both groups suffer from a lack of tools. Even leading institutions would typically use tools like Excel or other tools that only report static positions and no historical performance. This is a big problem as it makes portfolio tracking and monitoring very difficult.
The solution: better education and user-friendly applications
One way to overcome these obstacles is through education. When people are given the opportunity to learn about DeFi in a simple and easy-to-understand way, they are likely to be more interested in using it. Educational resources that break down the industry jargon and provide clear explanations of how DeFi works will go a long way in helping people better understand the space.
For example, most people understand what a “savings account interest rate” is. However, once you start talking about yield farming, the average person is quickly lost. But if you explain that yield farming is simply a way to earn interest on your crypto assets, then people are more interested in using it.
DeFi Mass Adoption: Accessible DeFi
Besides education, user-friendly applications are also needed to make DeFi more accessible. There are many different protocols and wallets, which can be overwhelming for someone new to the field. Developing applications that can help users manage multiple accounts and positions in a single place will go a long way in making DeFi more user-friendly.
For example, at Valk, our goal is to make DeFi more accessible to all by providing the tools and educational resources needed to overcome the current obstacles preventing mass adoption. There is an opportunity to take what works from TradFi and make it available to DeFi traders e.g. B. Better tracking of their portfolios, accurate profit and loss calculations, and doing this across the variety of protocols they are invested in, from liquidity pools to loans and credits, and that’s what we’ve achieved with Merlin. Most portfolio trackers on the market remain on the surface of executed trades and transactions, requiring DeFi traders to resort to Excel spreadsheets to track the full extent of their USD worth of investments and profits over time.
When everyone in DeFi is armed with powerful tools as well as educational resources, the industry will reach a tipping point where mass adoption will become a reality.
The next era for DeFi
After the dial-up era of the internet, we saw a big shift towards broadband. This allowed for much faster speeds and greater access to internet-based services. Similarly, we believe that the development of user-friendly applications and educational resources will lead to mass adoption of DeFi protocols.
When this happens, we will see a significant expansion in the use of DeFi applications. We will also see an increase in the number of people able to take advantage of crypto assets.
Some of the most promising applications in this space are those that provide users with more advanced analytics and insights. As important for DeFi as it is for traditional finance, users can better understand the full extent of their positions, strategies, and profits and losses.
Better tools have important implications for accounting, tax reporting, and strategy development. As users better understand their positions, we believe more and more people will start using DeFi protocols. This increased adoption will lead to a more inclusive financial system that gives everyone access to the best tools and information.
About the author
Antoine Loth is the CEO of Valk. He has over ten years of private equity and investment banking experience. Valk is an ecosystem of powerful decentralized tools for smart DeFi trading, such as B. Merlin, a smart DeFi portfolio tracker. Antoine has been featured in Fortune 40 under 40 for his work on private markets digital trading solutions with $4 billion in assets and businesses under management. He holds a BSC in International Management from Warwick and a Masters degree from ESCP Business School in London.
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