A large problem I see with DeFi is that it hard to keep up with everything that is happening in the ecosystem. This may be an AI or tech problem in general as well, but it does not seem abundantly clear how fast DeFi is moving, until you zoom out. You literally can have a chain like EOS and all this capital behind it and then within years it’s dead or barely progressing, meanwhile Bitcoin started it all off and Ethereum springs up in 2015, and there’s algorand, ada, and other’s chomping at the bit, all the while the protocols and white/yellow papers are out there happening. It just doesn’t seem to stop for you to catch your breathe, you have to selectively choose which projects to focus on and believe that they’re worth the time.
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Volatility: Many DeFi protocols are built on top of cryptocurrency networks, which can be highly volatile. This means that the value of DeFi assets can fluctuate significantly, which can be risky for investors.
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Complete scam and money laundering.
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A drawback for the majority of people new to DeFi could be the fact that you are in charge of your money. So you now have to learn how to manage your own money, which could be a very big task for many people, making the learning curve of DeFi even bigger.
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less liquidity than the regular financial system
A good point is that many people find using private wallets quite difficult not even talking about setting up an CEX account doing KYC and depositing some of their fiat where crypto is bought and from there being sent into DEX and start making moves like swapping some or depositing into some yeld farms/staking protocols.
It’s safe to say that 3 years ago I was also stucked at one place or may just too comfortable, where I was ATM and started properly learning all that after somebody who I knew helped me with setting up a crypto account, advising me what to do as KYC and how to set up a recepient wallet at one CEX and sending to the other one due to saving some money on deposit fees. Then I took it from there and discovered private wallets and dexes myself, Needed just a little push.
Barrier of entry as well as scalability seems to be the current challenges holding a lot of people back. Also being completely independant scares a lot of people.
Complex for the regular user, more education and UX simplification needed.
Excellent deeper layer of value. Thanks.
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Some other drawbacks to DeFi is lack of customer service, risk of smart contract bugs, and potential for hacks and scams in this space.
Apart from scams, also hacks that are exploited from smart contract bugs.
Drawbacks
-Responsible for regulatory of keeping track of transactions in liquidity pools such as DEX and other DEFI financial services
-Vigilant of hacks on smart contracts and verify chain of ownership. No banks are going to save you, this is the cost of being financially independent not companies.
To be honest banks have been committed frauds for years.
In the 2010’s credit suisse made a deal of 1.3 billions in loans with Mozambique government to invest in the fishing industry and intended only just for that. It was supposed to provide jobs to the people and boost the Mozambique economy. That didn’t happen and instead the money went missing and never gotten to the people. It turned out that it went straight to the corrupt officials of Mozambique government and kept the money to themselves. Credit suisse had a 50 million kickback, damaged was done and Mozambique poverty went up 60%.
That’s why you trust the network not companies.
Excellent layer of drawbacks
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Come up with one more drawback and share it in the forum.
Then respond to at least one other drawback from another community member.
Quantum computing and other future tech could decrease the immutability of a blockchain. We just can’t see the potential of future tech capabilities.
Corruption, greed and fraud are not isolated to leadership only. Whatever direction the network goes in there will always be someone there trying to steal and deceive. Constant vigilance by good people is one way to keep the wolves at bay.
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DeFi allows for the possibility of crypto losses through self-custody errors. While “not your keys, not your coins” means your crypto can be safely stored on your personal crypto wallet(s), the flip side of this is “lose your keys, lose your coins.” If you don’t have recovery measures in place (a secondary wallet backup or a recovery phrase) and you lose your wallet or forget its access password, you will lose all the crypto stored on the wallet.
Such a new space that it is difficult to get support help when something goes wrong. Can’t undo a mistake.
Nascent technology brings a landscape similar to the Wild, Wild, West. Ill-prepared investors are losing millions through simple errors when sending crypto. The user interfaces for DeFi right now are horrible. Easy to make mistakes. Mistakes are final too.
Adds to Digital divide. Those who cannot follow internet or do not have access to security tools are at a disadvantage.
i think most critical drawback is the security . Protect your wallets, email, personal information … If you try enter in Defi without education, learning (e.g Moralis Academic) the only outcome is losing… People must invest in education… I put it here as a drawback , not because education or learning is a flaw , just because i believe that not all the people have the income or even the belief to invest in education