DeFi Drawbacks - Assignment

DeFi 101 Course 2021
#142

I can’t complain about ethereum gas fees lately since its droped around the 5-20 range lately, but one thing about DeFi thesedays are all the scammers and phishing attack going on lately so blindsigning something to be concerned about.

Atleast there are a few teams out there addressing the blind signing issue. ABIs added to HWW sure helps but I think it can be a bit frustrating for some and definitely a bit too complicated for most. More user-friendly options are necessary to make DeFi safer for all.

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#143

  1. The Defi space is still in its infancy and things can go wrong.

  2. For a beginner who isn’t very familiar with the smart contracts programming languages, it can be challenging to wrap their heads around the idea of defi and its protocols.

  3. Risk associated with smart contracts may lead to irreversible hacks.

2 Likes
#144

Hi Josh,

on top of the drawbacks you mentioned in the video:

  • Tech drawbacks
    • lack of confidentiality
    • transactions cannot be reversed
    • smart contracts bugs hard to fix
    • ethereum gas fees
  • UX drawbacks
    • high learning curve
    • have to keep your own records for reporting
    • have to sign everywhere with HW
  • Regulatory drawbacks
    • uncertainty, bans, etc…

I’ll add this one:

The first contact outsiders get with DeFi is a uni-dimensional list ordered by market capitalisation, which is misleading.

Ordering by market cap does not completely make sense since the nature of each asset is so different. People get the feeling that this is just a sea of arbitrary tokens and that anyone can create any new token they like. This gives the wrong idea and hurts credibility.

It is not obvious for newcomers to get a sense that this long list boils down to just a few things:

  • one new form of money/digital gold (bitcoin)
  • a small number of application platforms (Ethereum, Polkadot, Solana, Algorand, Tezos, …)
  • Defi protocols (running on top of the application platforms, such as Maker, Uniswap, Aave, Curve…)
  • layer2 protocols to improve the scalability of those application platforms (Polygon)
  • stablecoins
  • infrastructure projects (Chainlink, Arweave, LivePeer, Hedera, Filecoin)
  • centralised exchange tokens (Binance, Crypto.com, FTC)
  • gaming platforms (Axie, Enjin, Decentraland, …)
  • and a very large number of purely experimental projects, historical bitcoin clones (Doge, LTC, …), meme projects (Shiba, …)
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#145

Good point DelBobs, the question of legacy and transmission after death has not been solved yet.
Though I’m keeping an eye on what Ternoa is doing on this topic with their time capsules.

Matt

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#146

Scalability issues due to gas fees

Regulatory issues depending on where you live until more people start using the application

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#147

One of the biggest drawbacks for me is that you need to use a DEX with metamask on Ethereums network to access many coins and then I cannot transfer them to my hardware wallet because they are not supported. Also its a lot of steps and every step has high transaction fees, especially on the Eth network.

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#148

hello thereeeeee hahaha

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#149

Hey Evan, How are you? :grinning:

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#150

In the event of instability in a blockchain hosting a DeFi project, the project could inherit instability from the host blockchain.
DeFi projects encounter difficulties in the scalability of the host blockchain.
DeFi transactions require extended periods of time for confirmation.

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#151

insightful post @Goli your defiitely right the stable coin market at the moment is litreally balancing on a needle. when it comes to decentraslized stable coins a solution in my eyes is very far off. your right new innovation needs to be done but the LUNA UST model is completley broken and many other stable coins are in fact using simiar approaches.

I have never actually heard ofTiUSD so i wil take a look inti this. you seem to have lots of knowledge in this maket hast off an continue learning

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#152

One problem I see is how safe is your password, or your password storage. This is a real big security issue.

Another problem I see is that one has to check again and again so as to make sure he is not sending to a wrong address because it is never coming back which could lead to loss of asset.

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#153

You still need a centralized exchange / entity to withdraw money in FIAT. therefore you are still in some way dependent on if there is an exchange that will do it for you. e.g. many exchanged banning russian users in 2022. I can have my crypto, but if I can’t withdraw it in FIAT when I need it, what is the point?

2 Likes
#154

true. the biggest thing i ate about crypto is the fact is not even being used for what it was built, namley a decentralised ecectronic cash system. instead th eonly reason ppl hold crypto is because they think they will make money off of it.

awnser me this. if you look at your protfolio and for all your crypto holdings were absolutley cetrtain that they would not go up in value. would you still hold them? no?

so its such a shame that this is the menatlity of th emarket and that the real problems of being able to use cryptos to buy thing sin the ral world is such a shame, i know the technology isnt there yet to completely sokve this problem but it seems like its not the main goal of developmen tin the industry.

#155

A drawback would be, that compared to the banking sector, where some suit wearing person can take every cute grandma by the hand and do everything for her, you need some knowledge and savvyness to get into DeFi.
Of course, this can be resolved by DApps with amazing user interfaces, but these won’t be there to use tomorrow.

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#156

Agreed, but if everyone pays with crypto for ideological reasons, it kind of defeats the purpose. So, it needs to be because there is higher utility compared to paying with central banker’s money, which is not the case right now.
It could come with time, when the year long price discovery comes to an end, because let’s face it, the volatility is a drawback for money. You don’t want to work a month to earn money for paying your bills, if that money could be worth much less tomorrow.
Also the central banker’s money gets more and more repressive, which pushes more and more people into crypto, who wouldn’t be interested yet, otherwise.

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#157
  • Evolve very quickly, it’s difficult to keep up
  • High risk of failure/attack
2 Likes
#158

  • The multiple hacks that DEFIs have suffered and will continue to suffer due to the newness of some of them and the speed with which they are created.

  • The double-edged sword of the word “DEFI”, since many are labeled as DEFI but are not.

2 Likes
#159

Is a good point, but you can always use P2P sites to exchange fiat for crypto even if it is slower than on a CEX.

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#160

For me I think it’s when a bug happens to be present in the smart contract and if a user loses money because of the bug. Well… RIP because there is no solution for it since the blockchain is immutable.

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#161

High knowledge barrier to entry at the moment

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