Time to Make DeFi Great Again? Here's How

Time to Make DeFi Great Again? Here's How

Trump returns to the White House for a second term. Reflecting on financial market performance, a Bloomberg report succinctly concludes: Wall Street votes Trump. The S&P 500 records all-time highs, along with its best post-election session ever.

Let’s not forget, though, that behind Trump’s victory, nearly 68 million Americans voted for the opposition (sourced from Google’s aggregation of AP data). Truly, one man’s joy is another man’s sorrow.

The crypto community largely shares in the joy; all major sectors in crypto have surged, with DeFi and RWA leading the way. Data from SoSoValue.

Bitcoin, the largest single cryptocurrency by market cap, has also reached a historic high. Data from CoinMarketCap.

Trump had 11 promises to the crypto industry when he was on the campaign trail: 

1/ Fire SEC Chairman Gary Gensler on Day 1

2/ Establish a “National Bitcoin Stockpile”

3/ Make the United States the “Bitcoin and cryptocurrency capital of the world”

4/ Retain 100% of the 203,650 $BTC ($14.95B) currently held by the U.S. government

5/ Eliminate capital gains tax on Bitcoin

6/ Support U.S. Bitcoin mining

7/ End regulatory crackdowns (the “anti-crypto crusade”)

8/ Launch a “Bitcoin and crypto presidential advisory council”

9/ Protect individuals' rights to self-custody digital assets

10/ No CBDC

11/ Commute Ross Ulbricht's double-life sentence, the founder of Silk Road.

Meanwhile, he’s been busy elsewhere, launching World Liberty Financial - a DeFi initiative - and appointing his youngest son, Barron Trump, as Chief DeFi Visionary.

Though it remains to be seen whether all these promises or intentions will be fulfilled during his term, market sentiment views these developments as positive signs for crypto and the next wave of DeFi innovation.

With crypto giants currently embroiled in battles with the SEC, perhaps now they can return to focusing on the “real deals” and innovating a better future for DeFi. This is significant even for communities outside the U.S., as the U.S. is a vital and leading force in global crypto and DeFi development. Any regulatory moves or actions by key industry players can send ripples throughout the global industry.

DeFi has evolved from its foundational roots in Bitcoin and Ethereum to a complex ecosystem offering a wide array of financial services. 

A Quick Overview of DeFi’s Journey To Date

Origins:

Bitcoin’s Inception (2009): Bitcoin introduced the concept of decentralized digital currency, laying the groundwork for future financial innovations. However, its limited scripting language restricted the development of complex financial applications.

Ethereum’s Launch (2015): Ethereum, created by Vitalik Buterin, introduced a Turing-complete programming language and smart contracts, enabling developers to build decentralized applications (dApps) beyond simple transactions. This advancement was pivotal for DeFi’s growth. 

Early Developments:

MakerDAO (2014): Founded by Rune Christensen, MakerDAO developed DAI, a decentralized stablecoin. Launched in 2017, it allowed users to generate DAI by collateralizing assets like Ether (ETH), providing a decentralized alternative to traditional stablecoins. 

EtherDelta (2017): One of the first decentralized exchanges (DEXs), EtherDelta enabled peer-to-peer trading of ERC-20 tokens without intermediaries. Despite its initial success, it faced challenges, including a significant hack in 2017 and regulatory issues in 2018. 

The ICO Boom and DeFi Expansion:

Initial Coin Offerings (ICOs) (2017): ICOs became a popular fundraising method, allowing projects to raise capital by issuing tokens. This period saw the emergence of several DeFi projects, including Aave (lending and borrowing) and Synthetix (synthetic assets). However, the ICO craze also led to numerous scams and regulatory scrutiny. 

DeFi Summer and Rapid Growth:

Compound’s COMP Token (2020): In May 2020, Compound launched its governance token, COMP, introducing liquidity mining. Users earned COMP by lending and borrowing on the platform, sparking a surge in DeFi activity and the practice of yield farming. 

Yearn Finance (2020): Developed by Andre Cronje, Yearn Finance optimized yield farming by automatically shifting user funds between different lending protocols to maximize returns. Its governance token, YFI, gained significant value, highlighting the potential of decentralized governance. 

Challenges and Market Corrections:

Black Thursday (March 2020): A sharp drop in ETH prices led to massive liquidations on platforms like MakerDAO, exposing vulnerabilities in DeFi protocols. This event underscored the need for robust risk management mechanisms within the DeFi ecosystem. 

Security Concerns: The rapid growth of DeFi attracted malicious actors, resulting in hacks and exploits. For instance, in October 2021, a bug in Compound’s protocol led to an unintended distribution of $90 million worth of COMP tokens.

Current State: Bottlenecks Blocking DeFi from Reaching the Next Level

As DeFi moves from its experimental phase toward a mainstream alternative to traditional finance, several pressing bottlenecks demand attention for the industry to scale further:

Regulatory Compliance and Security Standards: The absence of clear regulatory frameworks limits institutional adoption and creates ambiguity, especially around issues like KYC, AML, and consumer protections. DeFi must innovate to integrate compliance and privacy while preserving decentralization. Strengthening security standards to prevent frequent hacks and exploits is equally critical, requiring advancements in on-chain security audits and more resilient smart contract architectures.

Scalability and Cross-Chain Interoperability: Layer 1 blockchains face throughput constraints, causing network congestion and high transaction fees. Layer 2 solutions and cross-chain interoperability have emerged as partial solutions, but more seamless and scalable frameworks are needed to support a global user base. Innovations like zero-knowledge (ZK) proofs and more efficient consensus mechanisms can drive the efficiency and affordability of DeFi protocols, enhancing accessibility.

User Experience and Accessibility: DeFi’s technical complexity remains a barrier, especially for new users accustomed to traditional financial interfaces. Improved user interfaces, easier onboarding, and better educational resources are needed to make DeFi as intuitive and accessible as centralized finance. Simplifying the processes around asset management, custody, and cross-platform interaction will be key to attracting a broader audience.

Liquidity Fragmentation and Capital Efficiency: Liquidity is scattered across numerous DeFi platforms, reducing overall capital efficiency. New solutions that unify liquidity pools or enable interoperable assets across chains can make DeFi markets more fluid and efficient. Enhanced liquidity incentives and yield strategies that don’t require complex maneuvers like yield farming could make DeFi a more attractive option for both individual and institutional investors.

Institutional Adoption: Institutional interest in DeFi is high, but the ecosystem lacks institutional-grade tools for risk management, compliance, and reporting. Developing secure, compliant products that address institutional concerns, like real-time auditing and insurance against losses, is crucial to integrating DeFi with traditional financial systems.

Given such, both in retail and institutional contexts. According to GRVT’s survey of nearly 3,000 community members, the primary barriers to entry are as follows:

  1. Difficulty in moving money on-chain (45%); 
  2. Challenging wallet creation and management (20%); 
  3. Gas fees are a barrier (15%).

This may be the perfect time to make DeFi great, but it’s far from a quick endeavor.

GRVT’s Vision to Make DeFi Great

Before the Internet era, people couldn’t have imagined a place where you could buy virtually anything in one location. Today, platforms like Amazon, Taobao, Temu, and Shein make this a reality.

Much like America’s political division, the world remains divided between TradFi and DeFi, still often seen as two separate domains. Yet there is a group of people striving to bridge these worlds.

GRVT’s vision is to unite these financial landscapes. Even for professional traders or bankers, there isn’t yet a single place to “shop for all” investment products—let alone for the average person outside the finance industry. GRVT aims to be the “Amazon of DeFi,” with a mission to redesign the global financial system. 

To achieve this vision, the following challenges and risks needs to be addressed:

Default Risk Answered by Blockchain Settlement and Margin Management

GRVT employs blockchain-based settlement and margin management systems, which eliminate the default risk common in traditional exchanges. Through these systems, users retain complete control of their assets at all times, ensuring that funds remain within their ownership rather than being held by a third party. This approach mitigates risks associated with fund misappropriation and allows users to trade with the assurance that their assets are always in their possession.

Security Risk Answered by Self-Custodial GRVT SecureKey

A standout feature of GRVT’s hybrid model is itself-custodial GRVT SecureKey, powered by Dfns, a leading web3 wallet infrastructure provider. This wallet offers a solution to one of the most significant challenges in blockchain security: private key management. Unlike other CEXs, GRVT’s wallet allows users to securely interact with web3 applications without the complexities and risks associated with traditional wallets. With no seed phrases and a streamlined recovery process, the GRVT Wallet simplifies self-custody, offering defense and protection without sacrificing user experience. It’s designed to prevent the mishaps seen with exchanges like FTX, providing users with a secure, easy-to-use gateway to web3.

Smart Contract Risks Associated with Public Blockchains

GRVT operates on a private blockchain, further minimizing the smart contract risks associated with public blockchains. This choice reduces vulnerability to potential exploits and offers a controlled environment in which transactions can occur with heightened security. By leveraging a private chain, GRVT ensures users benefit from the transparency and immutability of blockchain while minimizing exposure to the unpredictabilities of public network threats.

Cross-chain Interoperability Challenges

Cross-chain challenges present a major obstacle—much like how AI couldn’t advance without foundational improvements in computer technology; the vision of an “Amazon of DeFi” cannot progress if cross-chain fundamentals remain unsolved.

Understanding the complexity and cost barriers in crypto, GRVT emphasizes user experience by partnering with XY Finance to offer gas-free, cross-chain bridging. This partnership with XY Finance, a cross-chain DEX and bridge aggregator, allows users to seamlessly deposit assets from a CEX directly into GRVT’s smart contracts without paying gas fees or navigating multiple wallet transactions. This breakthrough simplifies DeFi access for even non-crypto natives, bringing the ease and familiarity of a CEX to a decentralized environment—an industry first for DEXs.

Learn more:

Introducing GRVT Bridge: Instantly Deposit Crypto with Zero Gas Fees

Regulatory Risk 

GRVT addresses regulatory risks by proactively pursuing licensing and ensuring compliance with evolving standards. This approach serves several key purposes: protecting users from potential bad actors, ensuring GRVT can operate without interruption, and facilitating institutional and mainstream adoption. As regulatory frameworks take shape across jurisdictions, GRVT’s commitment to compliance positions it as a sustainable and legally sound platform in the crypto ecosystem. By establishing itself as a compliant exchange from the outset, GRVT avoids the operational disruptions that have affected unregulated platforms.

Conclusion 

In an era where technology and finance are increasingly converging, the return of Trump to the White House might signal more than just a political shift; it could catalyze a new age for DeFi and crypto at large. With market sentiment favoring innovation and a strengthened alignment between institutional finance and decentralized solutions, the industry has an unprecedented opportunity to break down the long-standing walls between TradFi and DeFi. However, achieving this ambitious vision will require concerted efforts to overcome technical barriers, regulatory challenges, and user adoption hurdles.

If GRVT and other key players succeed in creating a unified, accessible financial ecosystem—one that mirrors the simplicity and inclusivity of modern online marketplaces—the potential for DeFi to transform global finance is immense. The journey will not be easy or immediate, but with the right vision, partnerships, and infrastructure, DeFi can evolve from a niche sector into a central pillar of the global economy, shaping a future where financial access and empowerment are truly within reach for all.

Get the latest updates directly to your inbox.