One of the growing sectors decentralised finance or known as DeFi also has its own shortcomings. And the risk can be too big at times. “With decentralisation becoming more mainstream, financial crime has suffered a setback for some time at least. Earlier where many people fell prey due to identity scams and trust lapses, now with DeFi all of these issues can be sorted out through tech, where code establishes a link for two parties to transact on any platform,” Swapnil Pawar, founder, Newrl, told FE Blockchain.
Moreover, the recent collapse of the cryptocurrency exchange FTX in the second week of November once again brought the limelight to the DeFi’s weak ecosystem. Not to mention, Auros a cryptocurrency trading firm lost its 2,400 wrapped ether (wETH) DeFi loan.
Furthermore, a report by Grayscale Investments, an American digital currency asset management company stated that cryptocurrency assets comprise a material portion of the total value locked within many DeFi protocols. “Efforts are headed towards making the DeFi secure and keeping in mind the regulations imposed by central authorities. To balance those things out we will need to advance in the direction of innovations with proper research of tools and resources. ,” Bharat Patel, chairman, and director, Yudiz Solutions, added.
According to industry experts, cryptocurrency networks and DeFi as a technology is still at a nascent stage. “A DeFi protocol’s cryptocurrency holdings may sustain material harm to the DApps usage, governance utility, and token value if their value declines,” Raj Kapoor, founder, India Blockchain Alliance, added.