The main problem facing Defis (and it’s not scalability)
The capital invested in DeFi has multiplied, but there is a major obstacle to be solved.
Entrepreneurs and users also face difficulties related to these platforms.
“Everyone thinks that the main problem of decentralized finance (DeFi) is scalability, but this is not so.” The author of that sentence is Piers Ridyard, developer and entrepreneur in the world of DeFi, who detailed what are the most important challenges facing these platforms from his point of view.
The words of Ridyard, CEO of RDX Works and developer at Radix Protocol, were given at the BlockDown conference, which takes place in Croatia between May 11 and 13. His talk was called DeFi hacks and industrial revolutions – a path towards secure, easy to build, easy to use DeFi (DeFi hacks and the industrial revolution: a path to secure and easy-to-build-to-use Defis).
According to the opinion of this participant of the DeFi ecosystem, the most important challenge that these platforms have is the shortage of developers. While the money invested in these protocols has multiplied by 140 times in the last two years, the number of programmers working on them has barely doubled, Ridyard said.
As if the problem of quantity was no small thing, Defis also present very important complications for the developers working on them. This is because experts have to face problems such as scalability and constant hacking threats.
90% of developers’ time is not spent on creating new functionalities, but on checking that the protocol is secure, that the interface works and that there are no problems.
Piers Ridyard, CEO of RDX Works.
In addition, Ridyard said, the development in the DeFi is not at all simple. To illustrate, he showed the following graph, which represents the complexity of the structure that needs to be developed for these protocols to work.
The creation of smart contracts and the continuous interaction between them to calculate balances, shipments, receptions and other transactions with multiple tokens is something very demanding. And there also lies the point of origin of many of the hacks experienced by these platforms, the businessman explained to the audience.
The issue of DeFi hacks is still more relevant than ever in 2022. At the beginning of May, CriptoNeticias reported that the funds stolen from these protocols already exceed those of last year. Recently, the main target of attackers have been vulnerabilities in the code of bridges between networks.
On the other hand, Ridyard also listed the problems of DeFi for entrepreneurs in this field and for users of these platforms. As for the first ones, he assured that the creation of these protocols costs a lot of money and it takes years to make them grow so that they become profitable.
For users, as long as, defis are often very difficult to use. In addition, on many occasions they demand the payment of high commissions and transactions can take quite a long time to materialize, according to the vision of this speaker.
The numbers that concern in the DeFi
Ridyard’s vision can also be analyzed from the numbers. For example, with regard to developers, those of the so-called web3 (in which DeFi protocols are included) total “just” about 18,400 developers all over the world, as he explained during his conference.
As seen in the image below, this is very little compared to the several million that are in the various programming languages or with the 26.9 million programmers worldwide.
To this day, DeFi assets account for 0.06% of the global financial market, with $0.14 trillion ($140 billion) in total value. If this value were multiplied by 100, DeFi would reach $20 trillion, still far from the $400 trillion that is handled in finance all over the planet. Despite this, Ridyard indeed thinks that these protocols will dominate the world of finance in the future, as he stated in his presentation.