Why we are fixing DeFi…

June 16, 2021

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Sequel to our rebrand and even prior, we have channeled so much material and human resources towards building a sustainable and efficient decentralized financial platform that serves users just the way they wish to be served. Our vision of building a flexible platform which can be tweaked to suit different users has stayed unchanged and instead is growing. A robust decentralized platform that provides users with efficient tools for performing core financial activities is in fact a ‘human right’…at least according to us.

Current De-fi protocols, algorithms, platforms and project teams are simply amazing, we have made sure to always acknowledge that. One solution after the other and in a relatively short time span, a lot has been built by current efforts! Like a sophisticated military squad, blockchain developers have built tremendous financial tools on the blockchain. From the bitcoin core blockchain to over five thousand finance-focused decentralized projects, the strive to build have distinguished the crypto space as the most dynamic space…arguably.

A perfect system is an illusion. There is hardly any system without significant shortcomings. It is the constant effort to fix these shortcomings that births relentless builders and solutionists; the crypto space is blessed with tons of such individuals. Thinking outside the box, reinventing the wheel; regardless of how ‘unimportant’ a solution might look, it is a step closer to a better solution. Same can be said about the current defi space, we are steadily approaching a stable defi ecosystem.

Our current idea of De-fi is spearheaded by the ethereum blockchain; as usual, it continues to set the pace, providing a platform where anything can be built. Like the internet itself, ethereum is a harbor and a fertile ground where ideas grow. Unfortunately, it runs into a series of problems caused partly by its own success and by itself too.

With the size of Ethereum’s archival nodes currently sitting at over four (4) terabytes (4Tb) and the actual blockchain size well over a hundred (100) Gigabytes and each block adding two (2) Megabytes to this already huge figure, the Ethereum blockchain according to many ‘will never scale’ and in 2019, Bloomberg reported the Ethereum blockchain is ‘almost full’. Scalability and memory friendliness are both very appealing features and good ingredients for mainstream adoption. Regardless of your financial buoyancy, current ethereum gas fees are enough to crumble anyone’s financial life. We giggled at that, but it’s not really funny.

These issues are caused by an overly intensive use of the blockchain, exceeding the wildest dreams of the initial developers. Processing millions of transactions per day, the ethereum blockchain is unarguably the most used blockchain! The high fees, slow transactions and poor scalability stems from this. For a concept that promises better alternatives to the traditional banking system, ethereum is currently not living up to the expectations, thanks to its shortcomings. For these issues, many will ditch the ethereum blockchain if they had other options despite its many amazing features and capabilities.

Scaling ethereum and making it efficient for building lightweight applications have been the focus of many DApps and smart contract projects on the ethereum blockchain. One after the other, a number of solutions have emerged to improve the ethereum blockchain. While some of these have ‘worked’ others have succeeded in bringing the ethereum blockchain closer to a final solution.

Pending fixing, solutions built on ethereum blockchain have continued to suffer from these shortcomings. Ethereum-based De-fi projects have taken a big bite of this. However, apart from problems caused by the ethereum blockchain, defi projects also have a few shortcomings and could ‘do better’ in a number of ways. You could name a few of them, but we’ll go first…

Technical exploitations

Recent wave of flash loan attacks has hit a number of defi ecosystems; prior to this, liquidity pool hacks and consciously perpetrated rug pulls have rocked defi. Due to these technical issues, a good percentage of cryptocurrency enthusiasts have chosen to stay away from defi despite the excitement it commands. Exploitations or hazard; call it what you may but anytime this happens, investors are left to nurse their losses which are grave, regardless of how much is lost individually. This doesn’t spell positivity for the future of the most exciting concept in the crypto space.

It is hard to say for sure if these exploitations are really accidental; but in any of these cases, an enhanced technology could have saved the day. Blockchain’s technologies endows it with a natural security; however, as it continues to be leveraged for building extensive solutions, a depletion in this security could occur and knowledgeable ones are fast enough to use these loopholes to their advantage.

Cost effectiveness

Paying $50 to perform a swap of $100,000 worth of token(s) may look like a reasonable bargain. However, paying the same amount to perform a swap of $100 worth of token(s) sounds totally unreasonable. Core defi activities transcend mere swaps; each of these activities attract fees. On the ethereum blockchain these fees range from ‘manageable’ to ‘completely unbearable’. Users are faced with the dilemma of forfeiting the transaction or ‘taking the knife’ and performing this transaction. We missed the third option – cross-chain platforms! Cross-chain solutions are clever stuff, no doubt. Each of these have enjoyed good attention and the ‘ethereum killer’ propaganda is growing in popularity. Well, it's hard to say but ethereum is set to pass the test of time.

Despite having two relatively painless options, paying the high fees is inevitable in many cases and for many users. But the fact remains that they’d be happy if a better solution exists.

’Centralized decentralization’

The name instantly gives away the meaning; ‘decentralization’ simply means the inexistence of a central authority. Blockchain technology as a tool is designed to vest the power of authority and decision making on the larger population instead of a smaller central authority as seen in centralized communities. In this vein, blockchain is not only a financial tool but also a well-crafted social tool. If correctly used, it works well in both cases. However, that doesn’t seem to be the case in many ‘decentralized’ projects. A couple of cryptocurrency projects throw the word ‘decentralized’ around their governance model, with the concept of DAOs and ‘community led’ projects springing up around new projects and existing ones, decentralization is usually presented as an administrative and technological strategy which shifts the power of decision making to the majority and makes for a perfect consensus system of governance.

Many defi projects which throw decentralization around their procedures are still stuck in the cage of centralization and what they present as ‘perfect decentralization’ is just an edited and ‘centralized decentralization’. The team still rules and decisions are made by the very few. Cryptocurrency projects have struggled to achieve the kind of decentralization they boast of, both administratively and technologically.

Speed and general efficiency

Paying high fees doesn’t guarantee a fast transaction; in fact, it doesn’t guarantee a successful transaction. Many times, we run into these issues while using defi platforms and on many chains. Fact is, defi as a concept is pretty much in its early growth and the inefficiencies witnessed currently is part of a long-term growth process. However, it still adds to the poor user experience which keeps growing. On closer diagnosis, the cause of this issue is ‘two way’. While the blockchain which these platforms are built on accounts for the speed and to some extent, the efficiency; the platform itself takes a good portion of the blame for inefficiency.

Privacy

For many people, privacy isn’t really necessary; for others it is paramount; many others are indifferent to privacy as a topic and a concept. For us, identifying with any of this group is actually dependent on time and situation too. Sometimes staying ‘ghost’ is the craving. A flexible platform supports any of these situations and varying preferences. This feature is currently missing in defi. “Our names aren’t written on our transactions”, that’s right. However, wallet addresses can be traced to their owner(s), when this is done, it stops being ‘private’. We’ve seen this play out a number of times, owners of such accounts can only hope for a higher level of privacy; unfortunately, they can only hope.

We’ve studied most of these issues and for every reason we know that the enthusiastic cryptocurrency community deserves better. Solutions are being sought steadily by new and existing projects. But how are we fixing these issues ourselves? You’ve read over a thousand words already, let’s give it a rest and continue next time!

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