-The need for blockchain to improve user safety on-chain is becoming more important than ever.
-Decentralized finance (DeFi) could potentially fix many of the issues that centralized finance is facing.
-However, DeFi users currently face numerous threats, causing some to walk away in fear and financial ruin.
The need for increased safety on-chain is becoming more pressing in the world of crypto. With the investment side of crypto (aka “money crypto”) struggling to repair the damage caused by centralized finance (CeFi), tech crypto must focus on improving user safety with blockchain technology. This could have profoundly beneficial and lasting impacts across the crypto ecosystem.
In order for middleman-less finance to take off, protocols must be not only useful but also safe. To do this, the risk profile of DeFi must be low enough to make users feel safe enough to actually use it. Unfortunately, this is not currently the case. Bad actors have a range of attack vectors that the tech has yet to address. News of exploits, scams and financial losses is causing some to walk away in frustration and fear. This, combined with the difficulties and risks involved, means that many people never become users in the first place.
Fortunately, work has already started to address this issue. Self-custody and peer-to-peer (P2P) transactions enabled by blockchain could go a long way to avoid the sort of failures seen in CeFi. This could provide a much-needed solution to the problem, while also improving user safety on-chain.
In order to make this a reality, developers and engineers must create protocols that are not only secure but also intuitive and easy to use. They must also work to ensure that the protocols operate in a manner that makes users feel safe and in control of their funds. This includes creating robust mechanisms for dispute resolution, as well as ensuring that users are able to access their funds quickly and easily. Additionally, developers need to build in measures to detect and prevent fraud and scams.
All of this must be done in a way that is compliant with applicable laws and regulations, so that users and regulators alike can trust the ecosystem. Bill Hughes, senior counsel and director of global regulatory matters at ConsenSys Software Inc., has argued that this is the only way to ensure that crypto “fixes” the investment side of crypto.
The work to improve user safety on-chain has already begun, but there is still a long way to go. It is essential that developers and engineers continue to focus on this issue, as it is key to the success of the crypto ecosystem. If done correctly, it could revolutionize the way we transact and invest in crypto, and make it much safer for everyone involved.