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5 Major Challenges in Applying DeFi in Real Life

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Recently, the term Decentralized Finance (DeFi) has gained popularity, and this new system of decentralized finance has the potential to revolutionize the financial sector by enabling transparent and permissionless transactions in finance.

As a result, we have already explored many other topics related to DeFi such as What is Decentralized Finance (DeFi)?, Predictions of DeFi, and Major Use-Cases of DeFi. Here we are going to discuss the major challenges one might face in applying this DeFi in the real time.

Related: Algorand and DeFi Revolution: Whats are New Challenges and Solutions

Challenges In Applying DeFi in Real Life

Some of the major challenges that we face in applying the concept of DeFi in the real life is as follows:

1. Availability of Fiat on/off ramps

Neither the off-ramps nor the on-ramps are symmetrical in their layouts. As a result, the difficulty of mainstream crypto acceptance may be divided down into three parts.

  1. Fiat-to-crypto conversion.
  2. Cryptocurrency Volatility Management
  3. Exiting Cryptos

These tensions between fiats and cryptos make it more difficult to deploy DeFi in a real world environment.

2. Scalability

Scalability issues hinder DeFi from being used in the real financial sector due to its decentralized blockchain architecture. It’s also an issue since most Dapps for DeFi rely on the Ethereum blockchain network, which has hefty gas costs for each transaction.

Related: How Blockchain is Transforming the Travel Industry

3. Lack of Privacy

DeFi’s permissionless nature leads to a lack of financial privacy, which discourages people from incorporating DeFi into their financial operations.

4. Lack of Identity

DeFi faces many challenges such as credit scores which leads to the situation of over-collateralization requirements. This is also one of the major challenges in applying decentralized finance in the real world.

5. Smart Contract Vulnerability

In spite of the fact that DeFi’s smart contracts are highly secure and audited before implementation, many DeFi systems suffer from smart contract vulnerability, resulting in a lack of coverage.

These are some of the biggest issues that DeFi faces in the real world.

In Financial Services, we may reap additional benefits by surmounting these primary obstacles and implementing DeFi.

Related: 6 Best Tools You Can Use to Create a Data Catalog

Benefits of Applying DeFi in Real World

Here are some of the benefits we may acquire by utilizing DeFi – The New Decentralized Finance.

  • Ultra Transparent Transactions
  • Self Custody of Assets
  • Globally Accessible
  • Completely Permissionless
  • Highly Immutable and more.

We UIGStudio (https://uigstudio.com/services/defi-development), being a Leading DeFi Development Company try to bring DeFi based Financial Sector through our A to Z DeFi Development Solutions and Services.