Defi Winter: What May Come After the Bubble Pops

Defi Winter: What May Come After the Bubble Pops

By xuanling11 | Crypto Learning | 19 Sep 2021


Defi is a bubble. Or maybe it is. I don’t know. However, Cardano founder Charles Hoskinson believes it is. SEC chairman Gary Gensler believes and wants to regulate.

Why does Defi become so busted and become a bubble-like?

 

4 factors the Defi is missing

Defi is missing integrity, transparency, security, and vision.

 

Lack of integrity 

Each Defi project describes itself as a solution to current financial system problems. However, the way they described the solution was too complicated and hard to understand from people who had no background knowledge. One can claim they need to learn jargon but such complexity can not be explained well. There are missing pieces of information from projects. 

 

It then became somewhat a scam for people who were heavily involved but lost their funds. It seems they got scammed out of financial frauds. 

 

Lack of transparency 

Similar to lack of integrity, project programs did not clearly execute rules that projects claimed would do. For example, liquidity pools did not prevent flash loans or large transactions in and out quickly to prevent losses. The description only suggests potential risks of loss but not how such losses work.

 

Lack of security 

Defi hacking accounted for nearly 76% of worldwide hacking in 2021 and it has lost $361 million total. The platform was hacked partially because teams were too rash to roll out projects alive or they were not able to secure their codes to become un-hackable. Cryptocurrency is prone to hack because the technology was part of hackers’ technique. Defi is part of crypto and it needs to sustain multiple security attacks in order to convince people to join.

 

Lack of vision 

What are the reasons to replace Cefi? I think because Cefi is unfair and corrupted from the top. Unfairness because insider trading can help the rich to become richer and the poor become poorer. Corrupted from the top because the government can find a way to print more money while the bottom of the population will suffer. Defi cannot resolve or prevent any of those issues.

 

Defi is useless 

I think we still need Defi. It is a trial and error process. It brings some thoughts of how the financial system may evolve and we need to continue evolving into a better future.

 

In conclusion 

We should make Defi simple and find a vision to help projects grow and improve our society.


Photo by Aaron Burden on Unsplash
  

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