The Future of DeFi

From neglecting security to bad tokenomics, DeFi has played a hand in its own decline

Tokenomics aimed at financing worthless models, rampant hacks, and a lack of real-world utility have played a role in the beleaguered crypto market's decline.

Right...

Too much DeFi has been based on tokens minted from nothing or tokens that finance other tokens at high interest rates, with no part of the entire activity having any real underlying economic activity to back the yields offered.

And...

Secondly, security issues, hacks and exploits of DeFi contracts and bridges have been widespread, and most notable DeFi platforms have suffered some form of exploit.

So...

Lastly, the lack of a uniform standard for defining DeFi contracts has limited DeFi to native smart contract platforms and tools, which also limits potential for growth, universal clients and, ultimately, adoption.

Standards!?

DeFi’s maturation would be bolstered by addressing the aspirations of the underbanked in the real world.

Laudable, but not the same thing as having "standards". Green-washing here.

I agree there are deep issues, but they will not really be solved by "standards"; they will be solved by better and more sophisticated algorithms. Most "defi pools" are just ponzi-games, and so many "hacks" are not really hacks at all, but taking advantage of poorly thought out algorithms not protecting their edge cases. Uniswap, your time is up!

In the past couple of weeks, I have analysed, and then helped to fix, one such Defi "misunderstanding". Hard to know what to call it, but an algorithm did not behave as expected. This was not because it misbehaved but because the devs didn't really understand what it was supposed to do!

What was also interesting was the aftermath, where users are totally clueless about the real issue, the solution and the method of implementation. When defi-users are just a bunch of greedy morons (or at least those who manifest as such on social media), then it motivates devs to create more of the same!

So, some people want to be in a casino, while some would quite like investments. Changing Defi from one to the other will also mean changing the target audience.