Decentralization Could Cure Crypto’s Current Ills

The crypto industry is plagued by two challenges.

First, the market downturn — a temporary but painful challenge.

The second is the loss of trust in industry leaders, a far more fundamental and lasting challenge.

Both can be solved by migrating to DeFi. The result is a return to the very reason that cryptography exists: truly independent finance.

Let’s explain directly why the storage solution fails. Cryptocurrency companies marketed as industry experts and claimed to be experienced investors. They were well above market interest rates to seduce retail deposits.

In reality, not all of these “experts” know better ways to invest than the average user, like the so-called “professional” stock pickers. In fact, according to The Wall Street Journal, 85% of professional investors failed to exceed the market average in 2021, up from about 65% in the previous year.

Example: Voyager became a publicly traded company in 2019, claiming that “being public will create an environment that promotes trust and transparency while providing investors with the opportunity to invest directly in Voyager shares.”

The problem is that Voyager lacks true transparency. It was not possible to tell users that it had lent an estimated $ 650 million to a hedge fund at Three Arrows Capital (3AC). When 3AC made the loan the default, the user funds that preceded it with the 3AC loan disappeared and Voyager began to deny users access to their money.

That’s why it’s important for the entire crypto community to remember why the community exists in the first place: we received investor funding, but left them with a bag when things went wrong. I hated expensive and greedy intermediaries.

Future crypto investors will need to eliminate these centralized management companies.

It brings us the future of cryptography: DeFi (Decentralized Finance).

DeFi wallets allow users to stay in control of their funds, not third parties. The user already owns the money on either a hard drive, a computer, or a phone, so there is no run on the bank.

However, DeFi is still in its infancy, and most of the currently available Web3 wallets can be confusing even for advanced users. Users move back and forth between wallets or DeFi protocols and are often unaware of security flaws... other Investor Feel frustrated Due to outdated technology and poor user experience.

To gain traction and trust, DeFi-powered Web3 wallets need to have the ease of use of a centralized service. Users can enjoy the benefits of DeFi, from managing funds to high interest rates, without the problems of the usual DeFi protocol.

Developing effective and usable decentralized tools not only helps our industry endure these administrative nightmares, but it also helps the crypto community first influence the creation of crypto. It also helps to rediscover.

DeFi is a way to reinstill confidence in technology and welcome the next bullish cryptocurrency spring.

Deliver the day’s top cryptocurrencies and insights to your inbox every night. Subscribe to Blockworks’ free newsletter now.