DeFi Adoption Has Yet to Hit Masses
- DeFi market has seen unprecedented growth in the last couple of years but mainstream adoption still remains elusive
- Reasons why masses are reluctant to adopt cryptocurrencies
- People do not see cryptocurrencies as viable and functional due to market volatility
- There is a lack of familiarity with cryptocurrency; also people find it complex
- Not enough companies accept cryptocurrency as payment yet
The first decade of cryptocurrency has been an eventful one, with a decent combination of lows and highs. People have gone from heaping scorn on digital currency to promoting it as the future of money. There is an exponential rise in its user base as well, with some retail giants now accepting cryptocurrencies as payment.
While mainstream adoption of cryptocurrencies remains elusive, blockchain as a technology has seen some riveting applications in the financial landscape, out of which DeFi has become the latest buzz word in the industry.
Decentralized Finance (DeFi) as a technology creates a whole new paradigm for a globally accessible financial system. On platforms like Nuo, Compound, DyDx etc, anyone with a smartphone can now lend, access leverage, take out loans or invest in derivatives instantly.
DeFi bubble has grown exceedingly due to the increased number of new applications, primitives and protocols coming up every day. Today, the current value locked (TLV) in USD stands at over $650 million rising from just $200 million at the beginning of this year. DeFi has gained momentum in the last year and has now begun to take on a surge of interest from the crypto community with the market size bulging despite marked as volatile.
However, the meteoric rise of DeFi has not convinced the masses about its merits. They see the buzz surrounding it as noise with no substance. There are multiple reasons for that. Let’s take a look at them.
There are frequent violent fluctuations in the value of cryptocurrencies, because of which, not many see them as viable or functional. Investors are wary of investing in them. Interested ones are more interested in immediate gains and less in cryptocurrencies’ inherent utility. Masses are not convinced that digital currency can be worthwhile and valuable, and the wild swings of the market do not erode its functionality or use.
Lack of Right Knowledge
People may have heard about cryptocurrencies, but that does not mean, they also understand how to use them. Kaspersky’s report noted that a majority of people do not know how cryptocurrency and especially DeFi works. They also find them technically complicated. Masses, unlike the tech wizards and enthusiasts, are less likely to try out something they find complicated. They are also reluctant to adopt something that they don’t understand.
Cryptocurrencies have gained a cult following due to its promise of a regulation-free financial system. It is the same promise that is keeping the people away from it. They are not ready to believe in a system that is not centrally controlled or propagates the concept of trustlessness. For many, regulations and central control adds credibility to financial systems; and the methods of traditional financial systems are tested and proven to be reliable. Without regulations, they feel that a lot of risks are associated when it comes to accountability. There is also a FUD that they would collapse sooner or later.
Difficult to Spend
People only accept a currency that they are confident to spend. Although some companies and retailers have started accepting them as payment, it is difficult to spend cryptocurrencies at large for now. However, for mass adoption to happen, more prominent retailers and e-commerce sites will have to start accepting cryptocurrencies. They are unlikely to do so until there is uncertainty surrounding digital currency.
Number of scams
A few numbers of scams can deter the credibility of a complete system and in case of cryptos, the number of scams that have happened will always overshadow the goodness it can bring. They cannot decide on which project to put faith in. Also, most of the players have no proven track record or data-backed information in the public domain, making it difficult for potential users to make an informed decision.
However, with the rise in institutional interest in this vertical things have been changing recently and for this to gain acceleration, it is imperative that the current projects be truthful to their roadmap and deliver as promised.
To Sum it up
Cryptocurrency’s popularity is not a fad. It has the potential to disrupt the traditional financial system. Established players from different markets realize that and have expressed interest in it. However, for the adoption of cryptocurrencies to reach mass proportions, issues such as complexity, scalability, and lack of regulations need to be resolved. Potential users have to become familiar with cryptocurrency, and not just that, they need to see crypto payment as a fast, cheap, and suitable alternative to traditional payments. And, crypto companies need to build trust in cryptocurrencies.
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