Crypto’s Mass Adoption Moment — Why hasn’t it happened yet?
TradFi to DeFi Weekly Community Call — June 3rd, 2022
Special thanks to Ray for the summary!
Protocol Pros and Convenience Cons
Based on the organization’s name, you may have inferred that, on average, we’re huge fans of DeFi. Decentralized finance continues to eat the world, empowering countless people with unfettered access to cutting-edge money legos and tools.
However, this process isn’t without its (sometimes major) hiccups. While TradFi isn’t perfect, DeFi is no angel. It’s mired with technical twists and turns that can leave even the most patient learner at times frustrated and confused. In the latest community call, we discussed the major hurdles of DeFi and how some of the best minds in the industry are collaborating to surmount them.
TradFi to DeFi is a networking hub, project incubator, talent connector, mentorship provider, and opportunity maximizer for the DeFi enthusiast, whether new or experienced. Every Friday at 3 pm EDT, we host an open mic round table, where we discuss DeFi (decentralized finance), how it intersects with traditional finance, and where we see this whole thing going. This article briefly summarizes the topics of our latest discussion.
Itemizing For Optimizing
We don’t claim to have all the answers nor present a definitive list of DeFi woes. But together, the TradFi to DeFi community itemized six outstanding points that serve as serious hurdles to mass adoption. These points stem from collective experiences, observations, and interactions as we work to onboard as many users as possible into the exciting and sometimes wacky world of crypto.
1. Protection and Regulation
Remember the recent Terra debacle? Of course you do. We all do. But one thing that sticks out to outside observers of this fiasco is the sheer lack of retail investor protection and compensation. When Terra bit the dust, they left everyone (perhaps excluding whales, if some rumors are to be believed) empty-handed. There were no large-scale insurance policies, partial redemptions, or consumer protections.
Frankly, this scares the bejeezus out of your average person. Most collateralized protocols took at least some financial hit. Average people don’t want to risk their life savings being wiped out by an R&D project dressed up as a blue chip. Until we get more protection in the form of private blanket insurance policies and (for better or worse) more regulatory clarity, many individuals and institutions will remain on the sidelines.
2. User Experience and Interface (UI/UX)
We’ve all been there. You load up Metamask, and for whatever reason, the wallet won’t connect to the application. Finally, it works… for some reason. Or worse, you’ve missed a word in your private key (also called a seed phrase). You didn’t need that $3,573, right?
These issues terrify your average person. The user interface for many applications is challenging at best and nightmarish at worst. Similarly, most crypto and DeFi user experiences range from nerve-wracking (you did triple-check that address, right?) to downright heartbreaking. Until we put this on rails, your average person sees DeFi as too esoteric for tango.
3. Financial Literacy
Your average person is not a fan of the traditional banking world. High fees, long wait times, and poor customer service make for unhappy users. However, your average person doesn’t understand inflation, nor do they understand how to construct a well-balanced portfolio. Risk analysis is a skill that requires patience, practice, and time to hone, and most people are content to simply deposit their money in a safe, secure, insured account and earn a bit of interest. Sometimes they even forego the earnings and pay fees in exchange for peace of mind!
Financial literacy is sorely lacking in the modern world. This reality isn’t a decrying of the average person but rather a simple function of where we find ourselves in history. Retirement accounts were formalized in the United States in the 1970s. Roth IRAs were formed in the late 1990s. We’re still figuring out this whole finance thing as a society. Nevertheless, the relative lack of financial literacy is a major roadblock to further DeFi adoption.
4. Inverted Business Models
“Build it, and they will come” sounds great on paper but rarely works out. Try building a snow cone stand in Antarctica. That’s analogous to what many DeFi protocols are doing when shoehorning a use case into their project that showcases technological capabilities. You can have the best tech in the world, but if applied incorrectly to the wrong problem, the solution becomes moot.
Showing off technology isn’t intrinsically bad by any means. However, building a poorly constructed game and calling it play to earn isn’t enough to excite the masses. Similarly, calling an R&D a blue chip only solidifies DeFi as an experimental, confusing topic in the average consumer’s mind. Technology should offer a clear solution to an outstanding problem, not just serve as window dressing for the tech itself.
5. On and Off Ramps
Coinbase solves a big problem for people that want to get into crypto. What it doesn’t do is solve that issue quickly. The lack of consumer-facing, easy-to-access APIs means that the average person has to really want to use crypto as an alternative to swiping their debit card.
With some network fees rivaling that of card networks and onboarding requiring extra minutes (in some cases hours), your average person easily misses the point of crypto altogether. Until we have easily accessible, user-friendly, API-driven on ramps, adoption will remain relegated to the most interested and ardent of the population.
6. Developer Tools
Solidity is not an easy language to learn. If it were, we’d see more developers jumping at this $300,000+ annual salaries (and that’s on the low end). Compilers have begun to make the job easier, but we’re still in the early days of breaking down barriers to entry pertaining to code.
Builders shouldn’t have to learn the programming equivalent of ancient Greek to build the future of finance. Similarly, the supply and demand disconnect means that aspiring teams must shell out the supermajority of their resources to developers, further depressing the available talent and resources in the industry. We need easily accessible tools for developers to make all builders’ lives much easier.
Building the future of finance isn’t easy. There still exist significant barriers to entry for the average user. The bright side is that these issues are known and being actively addressed by incredibly competent, talented, and well-connected teams. Many of them are proud members of TradFi to DeFi! The future of finance is being built more quickly than ever before.
If you’re curious how this all fits together and where this exciting movement is headed, check out the TradFi to DeFi Discord! We have a community round table every Friday at 3 PM EST. We’d love your input — bring an open mind and your thinking cap! It’s never a dull moment in the industry.
P.S. you can also check out a recording of each Friday call on our newly launched podcast! Available for streaming on Apple Podcasts or Spotify!