The main problem facing DeFi (and it’s not scalability)

By May 12, 2022DeFi
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  • Capital invested in DeFi multiplied, but there is a major hurdle to clear.

  • Entrepreneurs and users also face difficulties related to these platforms.

“Everyone thinks that the main problem with decentralized finance (DeFi) is scalability, but this is not the case.” The author of that phrase is Piers Ridyard, a developer and entrepreneur in the world of DeFi, who detailed what are the most important challenges facing these platforms from his point of view.

The words of Ridyard, CEO of RDX Works and developer at Radix Protocol, were given at the BlockDown conference, which takes place in Croatia between May 11 and 13. His talk was called DeFi hacks and industrial revolutions – a path towards secure, easy to build, easy to use DeFi DeFi Hacks and the Industrial Revolution: A Path to Secure, Easy-to-Build DeFi.

In the opinion of this DeFi ecosystem participant, the most important challenge that these platforms have is the lack of developers. While the money invested in these protocols has increased 140-fold in the last two years, the number of programmers working on them has barely doubled, Ridyard said.

This lack of experts can lead to new opportunities for young developers. In this sense, this newspaper has reported that programmers with Javascript knowledge can be trained in Solidity in approximately six months to work with the Ethereum network.

As if the problem of quantity were not enough, DeFi also presents very important complications for the developers who work on it. This is because experts have to deal with issues like scalability and constant threats of hacks.

90% of the developers’ time is not spent on creating new features, but on checking that the protocol is secure, that the interface works and that there are no problems.

Piers Ridyard, CEO of RDX Workyes

Furthermore, Ridyard said, development in DeFi is not easy at all. To illustrate this, he showed the following graph, which represents the complexity of the structure that needs to be developed for these protocols to work.

Illustration of the complexity of how DeFi works expressed by Ridyard. Source: BlockDown 2022.

The creation of smart contracts and the continuous interaction between them to calculate balances, sends, receives and other transactions with multiple tokens is very demanding. And therein also lies the point of origin of many of the hacks experienced by these platforms, the businessman explained to the audience.

The issue of DeFi hacks is more relevant than ever in 2022. At the beginning of May, CriptoNoticias reported that the funds stolen from these protocols already exceed those of last year. In recent times, the main target of attackers has been vulnerabilities in the code of bridges between networks.

On the other hand, Ridyard also listed the problems of DeFi for entrepreneurs in this field and for users of these platforms. As for the former, he assured that the creation of these protocols costs a lot of money and takes years to grow them to become profitable.

For users, meanwhile, DeFi is often a difficult platform to use. In addition, on many occasions they demand the payment of high commissions and the transactions can take a long time to materialize, according to the vision of this speaker.

The numbers that worry in DeFi

Ridyard’s vision can also be analyzed from the numbers. For example, regarding developers, those of the so-called web3 (in which the DeFi protocols are included) total “barely” about 18,400 developers around the world, as he explained during his conference.

As seen in the image below, this is very little compared to the several million there are in the various programming languages ​​or the 26.9 million programmers worldwide.

Developers dedicated to web3 and DeFi are few compared to the total in the world. Source: BlockDown 2022.

Today, assets in DeFi represent 0.06% of the global financial market, with 0.14 trillion (140,000 million) dollars in total value. If this value were multiplied by 100, DeFi would reach 20 billion dollars, still far from the 400 billion dollars that are handled in finance around the planet. Despite this, Ridyard does think that these protocols will dominate the world of finance in the future, as he stated in his presentation.

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