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It’s fascinating to see the human preoccupation with velocity. We’ve learned that our full potential allows us to expand our horizons in every way: in terms of perception, activity, and the quality of our lives. Faster speeds are not only enjoyable, but necessary for development, enhancement, and the achievement of previously impossible goals.
But suppose there was a catastrophic limitation on our hypothetical Ferrari. What if the radio, electric system, brakes, and air conditioning all used 90% of the available horsepower? Imagine if you were restricted to using it only on the interstate, and then only during peak hours. That’s right, it’s still a gorgeous ride. Unfortunately, you’ve eliminated its primary selling point.
Even in the DeFi universe, this is occurring, which seems like a ridiculous “What-If.” Let’s investigate this phenomenon, its causes, and the steps necessary to develop a workable remedy.
Contrary to Expectation
There has to be a thorough grasp of the industry’s existing condition before we can delve into this problem. DeFi is in its infancy from a bird’s-eye view. Crypto’s primary value is in its decentralization, and the recent centralized implosion around the market, notably with the FTX crash, shows that this maturity could not arrive soon enough.
DeFi has the impetus it requires to prevent an industry meltdown because it has so many really important kinds of utility to give the world, outside borders and banks. To be sure, prices have fallen this year, and the business sector is experiencing a severe bear market. Of all, fluctuations like this are par for the course in the financial markets, and they are quite reasonable in light of everything the globe has gone through since 2020. The market downturn is a positive indicator that the sector will recover even more strongly than before.
Perspectives on Strict Boundaries
When several activities can be knitted together in a single transaction, DeFi’s exponential potential will be realized. DEX aggregators (1 inch being a major example) and other DeFi platforms have built a business out of this by ensuring consumers always get the best price. They take what might be complicated transactions, including interactions with numerous markets at once, and depend on these bundled activities to generate value.
This tendency toward more complexity is accelerating. This deconstruction is encouraging for the Ethereum network and its potential as a Dapp platform. The majority of Ethereum use is for contract interaction, demonstrating that Ethereum is useful for more than just monetary transactions.
The crypto community as a whole is maturing, discovering new applications, and experimenting with richer forms of cooperation. Fantastic; the market has been waiting for something like this. But now the issue is whether or not it can manage this expansion while still maintaining low transaction costs. The apparent response is negative. Start with Profit Builder if you’re looking to broaden your horizons in the crypto realm.
Finishing Up
Growing skepticism suggests that the existing DeFi ecosystem’s success and development pose the greatest threat to its stability. Without significant adjustments, DeFi’s success might be fatal.
There is cause for optimism when comparing the current state of the crypto/Web3 business with its humble beginnings and significant limitations. Consider the transition from Proof of Work to Proof of Stake as just one example of how non-linear, relatively radical developments may significantly boost the ecosystem as a whole. We need the subsequent wave of radical ideas and exponential advancements, but for the time being, platforms like Ethereum 2.0 may help the system hold out. DeFi addresses all of the underlying issues that led to the failure of FTX, which FTX proved without a reasonable doubt. DeFi that can be scaled to large areas is urgently required.
We’re now riding about in that Ferrari, which may seem quick on the outside but has some rather ridiculous handicaps. For a globally adopted financial market, we need to prepare for transactions that are both bigger and more complicated. Getting to those kinds of dimensions will allow us to put the pedal to the metal and achieve the top speeds we’ve always hoped for.
Reviewed and edited by Albert Fang.
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Article Title: Weaknesses In The Present DeFi System And Why We Can’t Rely On It
https://fangwallet.com/2022/12/16/weaknesses-in-the-present-defi-system-and-why-we-cant-rely-on-it/
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