Challenges in Decentralized Finance

Unsustainable DeFi Yield Farms

The DeFi sector has witnessed a speculative frenzy over the past few years, with investors chasing ever-higher yields through yield farming. Unfortunately, these high rewards were often tied to the market value of the native tokens of the protocols, making such opportunities unsustainable in the long run. This created a volatile environment and left investors exposed to considerable risks.

Risky DeFi Credit Offerings

Many DeFi protocols face inherent risks, including credit risk, legal complexities, and an over-reliance on third-party due diligence. Moreover, the lack of compliance and regulation in these protocols poses a significant risk, which could amplify in the future. DeFi needs a robust solution to tackle these issues and gain the trust of traditional financial institutions and investors.

Large Idle Stablecoin Supply

The total supply of stablecoins is over $120 billion, with a significant portion of them remaining unallocated. This leads to opportunity costs for stablecoin holders, who could otherwise be earning returns on their idle assets.