DeFi Drawbacks - Assignment

Come up with one more drawback and share it in the forum.
Then respond to at least one other drawback from another community member.

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  • Scalability issues at the moment, i have seen how 1 new hyped project is capable to increase gas fees to more than 600 wei in few hours of it launch, making the network almost impossible to use for few moments.

  • Smart Contracts Bugs, this almost always ends in a hack of tons of millions of funds drained from the new defi protocol.

  • Too many scammers, you have to research quite a lot about the project your about to invest some funds.

Carlos Z

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1:) Need to be vigilant on security. Manage security of passwords and phrases
2:) Technical difficulties
Not user friendly user interfaces.
3:) Many scammers on the net must really pay attention to the Trx being made. No way to get money back if money is sent to the wrong destination

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A good social drawback is that when you get involved with it and talk about it with regular people, you run a high chance of losing your friends.
No. One. Cares. :sob:

The immutable nature of smart contracts is also a heavy burden for developers, and to a degree stifles innovation. The fear of having a smart contract bug means you can’t/shouldn’t move quickly.
Coming from the startup world of moving fast and iterating often falls flat here when people are putting their money into smart contracts.

As someone who wants to do alot in this space, the fear of smart contract bugs has been the biggest road block.

And yes, there are smart contract auditors. But if you’ve ever employed a good one, you know how expensive :money_with_wings: they can be :scream:

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The worst drawback of them all is that the whole world is not using this technology right now.

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Definitely feel those vibes my friends I grew up with are not interested in investing there time with assets instead of liabilities

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A drawback not mentioned explicitly was that a loss of your private key means the loss of your wallet and everything it contained/had access to.
Developments are being made to make wallets recoverable.

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As per zak_mahir, it is a new technology. Over time, user experience and stability will make things better.

There are is almost no support desk for the protocols and it takes a lot of technical understand even to formulate questions, errors or missunderstandings. The literature is regularly out-dated and not anyone is able to navigate in Github and the like tools. Forming teams and finding the right people to join a project when you have a business idea is very difficult at the beginning at least. No local community yet to exchange experience in the pub :wink:

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The space is very young,
Also when someone asks how to interact with defi or even send funds to a metamask wallet they go blank. its just too hard for them.

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I agree with the support you mention.
Support consists of telegram groups with scammers sending DM’s pretending to be support techs.

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Projects can be hacked, if you’re not a programmer it’s hard to know which projects are not scams.

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Due to the decentralized nature of the space it takes time to figure out how to do things safely. It usually involves a lot of research to understand how to interact with certain smart contracts/interfaces as there are few tutorials available.

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A smart contract can get hacked.

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That’s a good point. That’s why many people don’t know how to use a wallet. It sound like too much work. Mass adoption would be happening faster if the wallets were more user- friendly.
I have a lot of friends and coworkers who want to buy crypto and NFT’s but cannot get around using a wallet of their own.

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Good point nbkeaton.
I lost access to a Metamask wallet that I had set up a Theta network address as an account 2.
I accidentally deleted the account thinking that I could just enter the seed phrase again but apparently Metamask does not back up the seed phrase for additional networks and I need a keystore file to recover it (which I don’t have). Luckily there were not a lot of tokens in there, but it was a valuable lesson learned.

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Another drawback to defi is that its difficult to find a trustworthy protocol if you don’t understand how to read code.

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in control of own security.
can not get funds back if transaction made in error
no customer service or “person” you can talk to to help

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One drawback is security and ensuring that you know exactly what you are doing when using Defi applications.

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  • Contracts could be faulty, unaudited, and will lose you some money.

  • Fees on ETH L1 network is normally high, pushing ordinary people towards L2s or other native L1 blockchains. Its hard for some to participate.

  • Some shady characters always trying to fool you to insert your seed phrase. Some look alike websites might trick you into signing in with your wallets and without you checking and verifying for permissions later drain your wallet.

  • Some protocols have higher fees with TXs.

  • Some might rug pull you: i.e. Squid Games

  • For support you must rely on FAQ or Discord

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