MSV Podcast

Roundtable: “Transitioning The World To DeFi”

March 09, 2023 Morningstar Ventures Season 1 Episode 4
MSV Podcast
Roundtable: “Transitioning The World To DeFi”
Show Notes


Top 5 Key Takeaways:

1. The value proposition of DeFi is only being appreciated now

The first key takeaway was mentioned when the guests were asked about the various challenges seen in DeFi today. According to our guests, though numerous projects within the crypto space create robust solutions, DeFi was underappreciated until the fall of FTX. With the collapse, users started to understand that the convenience of centralization can have severe consequences. Injective, Paraswap, and Coin98 have all been dedicated and fully committed to decentralization to limit the risk for their users.

2. Traditional financial institutions are looking to DeFi to solve their challenges

Before everything that happened in November 2022, many institutions showed interest in crypto. FinTechs and banks were conversing with mainly CeFi projects to see how they could trade via their infrastructures. This mindset shifted with the fall of FTX, leading to a rise in DeFi. Institutions started to come towards DeFi builders to understand their protocols and build with them. 

Mounir, Thanh, and Albert all agreed that what institutions are looking for are twofold: 

  • Counterparty risk that is suppressed while using DeFi
  • Instant settlement components - which is an upgrade of what already exists in TradeFi

3. The DeFi ecosystem needs more builders focused on network obstruction

The conversation flows back to the seamless onboarding and UX of DeFi applications. Especially when it comes to a complex topic like DeFi and crypto, everything needs to be built to increase the attainability for real-world users to gain more market share. A dApp should be so simple to understand that even if one doesn’t know anything about DeFi, derivatives, or leverage, one should still be able to use the dApp.

4. User experience must be simplified before we consider onboarding the next millions of users

Although some projects are pushing the limits and have seen immense growth in the DeFi space over the past years, onboarding is still challenging. A topic such as wallet management is still very “heavy” for people to understand, and that is perhaps why DeFi doesn’t have millions of users yet. Similarly, it’s not just the users who need to gain a simplified understanding and suite of tools, but developers too.

5. Education, experimentation, and putting security at the forefront will mature DeFi to the next level

Last but not least, we asked our guests where they see the evolution of DeFi going, given that it currently faces two significant challenges – lack of security and regulation. 

Our guests agree the industry is on the road to maturity, with more best practices showcased across the ecosystem. Nevertheless, in the short-coming future, DeFi will continue to be in the experimental phase. Albert says there is an inherent tension between innovation and security that protocol builders must face when building. Thus, security will be top of mind. 

Our guests go on to discuss the misconception that DeFi is safe because it’s non-custodial, but there are still a lot of tech risks that come with it. In the future, it would be good to see more standards on protocol and how it needs to be built. Builders can learn a lot and borrow many regulatory practices from traditional finance based on years of research.