Decentralized Finance (DeFi), a new system of decentralized finance that has recently gained popularity, has the potential to revolutionize the financial industry by enabling transparent and permissionless financial transactions.
Due to this, we have already covered many other DeFi-related topics, including What is Decentralized Finance (DeFi), Predictions of DeFi, and Major Use-Cases of DeFi. In this section, we’ll talk about the main obstacles to using this DeFi in the real world.
Challenges In Applying DeFi in Real Life
The following are some of the greatest obstacles we face when applying the DeFi concept in the real world:
1. Availability of Fiat on/off ramps
The layouts of the on-ramp and the off-ramp are not symmetrical. As a result, there are three main components to the difficulty of mainstream crypto acceptance.
- Fiat-to-crypto conversion.
- Cryptocurrency Volatility Management
- Exiting Cryptos
These tensions between fiats and cryptocurrencies impede the deployment of DeFi in the real world.
Due to its decentralized blockchain architecture, scalability issues prevent DeFi from being used in the real financial sector. It’s also a problem because most DeFi Dapps rely on the Ethereum blockchain network, which has high gas costs for each transaction.
3. Lack of Privacy
Because DeFi doesn’t ask for permission, there is little financial privacy, which makes people less likely to use it for their money.
4. Lack of Identity
DeFi faces numerous challenges, including credit scores, which result in over-collateralization requirements. This is also one of the most difficult aspects of implementing decentralized finance in the real world.
5. Smart Contract Vulnerability
Even though DeFi’s smart contracts are highly secure and thoroughly audited before implementation, many DeFi systems are susceptible to smart contract vulnerabilities, resulting in inadequate coverage.
These are some of DeFi’s greatest challenges in the real world.
In Financial Services, overcoming these primary obstacles and implementing DeFi may yield additional benefits.
Benefits of Applying DeFi in the Real World
Here are some advantages of using DeFi – The New Decentralized Finance.
- Ultra-Transparent Transactions
- Self Custody of Assets
- Globally Accessible
- Completely Permissionless
- Highly Immutable and more.
As a leading DeFi development company, we bring DeFi-based financial services to the market through our A to Z DeFi development solutions and services.