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DeFi and CeFi need to be friends for a while longer, says Masha Balanovich, External Communications Manager at Drofa Comms.
We have seen financial products and services move to a decentralized ecosystem — payment, trading, investment, and more. But, are blockchain and decentralized finance (DeFi) enthusiasts in an information bubble?
These enthusiasts assume mass adoption of DeFi is close at hand. However, that might not be the case as DeFi is still in its startup phase, and some key elements must be in place to drive successful mass adoption. Notably, the number of DeFi users grows yearly, but it’s just a small population compared to those in the centralised finance (CeFi) space. There were only about 5 million DeFi users as of July 2022.
Below are three key reasons why the mainstream mass market is yet to adopt DeFi.
Sought-for Global Regulatory Framework
Recently, we have seen various governments’ reactions and initiatives to try to regulate the crypto market. In July 2022, at that time Chancellor of Exchequer, Nadhim Zahawi, introduced the Financial Service and Market Bill, which includes regulations of crypto assets and stablecoins. Recent bills in the US include Lummis-Gillibrand, introduced in June 2022, and Boozman-Stabenow, presented in August 2022, aiming to create a regulatory framework for digital assets.
However, we lack regulations that guide how blockchain technology or DeFi works as a whole on the international level. Undoubtedly, DeFi systems can indeed exist in the current laissez-faire state, but regulations are a catalyst for a technology’s success. First, it could easily boost public confidence, thus impacting institutional and retail adoption. Second, in addition to safeguarding the public interest, regulations could ignite DeFi innovations. A 2022 survey by the Economist showed that 27% of the respondents consider government regulations a key barrier to a country becoming cashless.
International regulations contributed significantly to the mass adoption of the TradFi banking system across the world at one time. The global consensus on the regulatory framework could also apply to the entire blockchain technology to encourage mass adoption.
DeFi: Lack of Education, Financial and Tech Literacy
Lack of regulations is not the only challenge, as a significant portion of the global population doesn’t have a clear idea of how DeFi and general blockchain technology functions. For instance, a recent survey showed that 48% of young British adults don’t understand how crypto works. However, 56% of them intend to invest in digital assets in the future. An NRG Web 3.0 Report outlined that a whopping 54% of consumers have never heard the term “Web 3.0” and only 13% of them think they know what it means.
Notably, blockchain has created new professions that are in high demand. For instance, out of 31 million developers worldwide, active Web3 developers represent less than 1% worldwide. For this reason, more cry
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