ReBlonde CEO Motti Peer says the move from TradFi (traditional finance) to decentralization is more than just flipping a switch.
When discussing the need to bridge the gap between DeFi and TradFi, they look at modern online banking systems and wonder what prevents cryptocurrency projects from mirroring the same functionality. Can’t you take out a mortgage on the blockchain without an intermediary, cancel a transaction due to a miscalculation, or walk into a convenience store to pay for groceries with cryptocurrencies? ,Can not do that. And not just because there is no consistent regulatory framework.
It is true that selling part of a house on a blockchain as a security token is still not legal in most places. The right regulatory framework is important, but the problem with creating blockchain use cases that mimic traditional finance runs as deep as the technology itself.
Let’s start with DeFi, an industry of blockchain use cases that lacks some of the fundamental capabilities available in traditional finance. DeFi is web-based and in many ways an ecosystem independent of the outside industry, so the possibilities for building use cases are endless and pure. As such, it is instructive to consider the technical challenges plaguing the industry, such as the need to adapt property laws to enable tokenization of assets.
TradFi vs Defi: The Limited Side
Smart contracts are at the core of DeFi and most blockchain applications. In Q1 2022 alone, a total of 1.45 million smart contracts were created. To create any kind of his DeFi protocol, you need to deploy smart contracts. This is a time consuming process that will cost him $7,000 to $45,000 to develop. The audit phase can run up to $100,000, all before even touching deployment costs.
Whether you are a small cryptocurrency project or a legacy company looking to adopt smart contracts, this is no small price to pay, especially in the current economy. Companies are working hard to find ways to get the most out of smart contracts and reduce the need for new contracts at every step. An example is DAO’s Spool, which recently launched a Smart Vault creation tool, allowing users to create customizable yield protocols to build their diverse DeFi portfolio on the platform. Otherwise, such protocols would require the creation of new smart contracts.
Beyond the costs associated with deploying smart contracts, we should look at the underlying architecture of the blockchain on which the use cases are built. The industry has yet to fully solve the problem of siled blockchains that cannot communicate with each other. As various blockchain networks operate in isolation, several cross-chain interoperability solutions have been developed to address this issue. However, each solution found comes with weaknesses and technical complexities.
Lack of manpower alone
The lack of foolproof cross-chain interoperability solutions hinders liquidity transfer and tradability. Derivatives platforms such as GMX and Perpetual Protocol have to rely on centralized trade execution mechanisms and have a limited number of assets available for trading. Currently, Primex Finance appears to be the only cross-chain prime brokerage protocol that allows cross-DEX spot margin trading.
The slow progress in seamlessly connecting blockchains in a way that fuels industry growth is largely due to the lack of the very people who can build solutions to do so.A quick search for blockchain developers on LinkedIn , find over 90,000 vacancies worldwide, highlighting a shortage of supply. A serious shortage of Web3 developers stems from her need to know certain Web3 coding languages such as Solidity and Vyper, and the mindset shift required to make decentralized protocols a reality.
Addressing the developer shortage requires efforts to better involve programmers in the DeFi world without overcomplicating the process. Embrace and foster innovations like Kirobo’s Smart Transaction (ST) technology, an API that allows a Web2 developer to build his web3 protocols and projects on the blockchain without the need for smart contracts or coding. is needed.
With an increasing number of projects trying to bridge the gap between DeFi and TradFi, it’s important to remember that more tools will only get you so far. The dream of decentralization will eventually go through massive adoption, and the more users are free to use their assets, the better the whole ecosystem will work. Additionally, projects should work to implement a greater arsenal of cross-chain interoperability possibilities to truly give users that freedom.
About the author
Motti Pia that is CEO of Reblondis a Tel Aviv-based global PR firm with an award-winning team representing clients in a variety of technology sectors, from AI and medical tech to cryptocurrencies, fintech, blockchain and venture capital. increase.
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