Let's talk about defi's shortcomings and the tech that's coming to address it.

Next Steps for Defi

This is a continuation of the article "Why is Defi Dead?" in which I laid out a few problems causing defi to stagnate in the eyes of crypto enthusiasts and tradfi operators. Thinking it over, there were a few problem items I missed, and I also want to ensure that my tone is overall solution-based.

More Problems in Defi

The one-sentence summary of my last article: Defi is too volatile to do anything except aid in the fragmentation of crypto users and new technology.

Basically, the only people using defi are "institutions" comprised of memelords who got lucky last cycle and degens still looking to somehow get lucky. Mark Cuban might have enough money from basketball and Shark Tank to get rugged for six figures in Iron Finance, but no normal self-respecting investor is going to do that.

The platforms closest to building a real bridge to tradfi include stuff like Pendle and MakerDAO, and these platforms have purposefully reduced their yield to increase sustainability and bring rewards down into believable territory. No self-respecting degen will use these platforms; the APR/APY is too low.

But wait! There's more!!

Each of these two fragmented audiences have unique problems as well. Big money can't expand into smaller markets on Ethereum because the degen audience isn't there to culturally sustain any memes or smaller platforms there. All the degens are on Solana and Ton, as they value speed, low fees and convenience more than decentralization and safety.

So the core tech of Ethereum, Solana and Ton limit the ability of their projects to attract an aggregated audience. This is a problem that must be fixed at a chain's base level, and the core tech for these top chains is fairly set in its ways. As any dev will tell you, it's much easier to build a more performant upgrade from scratch than it is to switch course on a current build. Especially in the world of open source, where devs are free to take best practices into a wholly new project and leave the crap behind.

Terraforming Defi

Monad is providing EVM compatible, 10k TPS tech in a culturally relevant L1. [Read: Monad took the best practices from Ethereum and Solana, left the shit behind, and is about to drop a blockchain with the capacity to bring together all of defi.] With tech like this, the opportunity to move defi forward into true integration with tradfi is finally here.

What we'll begin to see on Monad specifically are projects taking the best from CLOB and AMM tech — marrying the most efficient type of liquidity with the security of being on chain. For example:

One of the top projects dropping on Monad is Kuru, a DEX still in stealth, profiled here. I believe the major reason they're getting the unofficial-but-official treatment from Monad is the strategy they put forth for more efficient liquidity pooling. Kuru will be the first DEX leveraging Monad's unique tech to bring a CLOB format to an EVM compatible chain. This gives traders the pooling efficiency of a CEX while maintaining all of the advantages of an on-chain AMM-based DEX.

Backend tech like this doesn't move the needle much from a consumer perspective, but it is essential infrastructure needed to terraform defi into just fi. Big money comes in when liquidity can handle it, not before. To get that first big fish to bite, all the degen crypto natives and wannabe web3 VCs need to pool themselves in an efficient way. Monad and Kuru is the first project/infra duo to really push on chain liquidity efficiency forward in a meaningful way since Ethereum itself.

Aggregating Defi

The next step after terraforming the liquidity pools is to allow for more sophistication in on-chain capital markets. As crypto matures, the law of diminishing returns reduces the opportunity for that one-shot 1000x or hacking your way into millions. Delta-neutral trading that relies more on interpreting efficient markets will come to the forefront. 

Monad is the first project with the infrastructure to allow for the aggregation of single-issue platforms into an open field of daisychaining possibilities. Yes, certain projects did this on Ethereum, especially during the let's-hack-through-flash-loans phase of defi summer. This was not a technique available to a non-tech investor, nor was it useful beyond a few preset techniques. Monad's sub-cent fees and ultrafast finality help to ensure platform aggregation expands into the commercial financial sector.

All we need at this point is a platform that actually aggregates. (It's coming. Stay tuned.)

Defi's Resurgence

The best time to invest in a project or sector is when everyone else says it's dead. Guess what? Everyone says defi is dead. Everyone who's on the outside looking in, that is. The amount of passionate building within the space is the way to discern a truly dead investment from a sleeping giant.

And there's still plenty of building going on in defi.

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