Decentralised Finance or most commonly known as DeFi has proved to be a revolutionary technology. Unlike traditional banking institutions, DeFi promises to offer users lending and staking services without the need for collaterals. DeFi’s concept of peer to peer cryptocurrency transactions has undoubtedly exploded during these months of Covid-19 crisis. Several different DeFi protocols have reached new heights and the industry has been in the headline for a couple of months now. According to DeFi Pulse, the DeFi analyst has revealed that lending services on these platforms have increased by 3 times (now amounts to $3.7 billion). This is because central banks have reduced the interest rates to cope up with the economic recession.
DeFi at Least Must be Self Regulated
However, as tempting DeFi may sound there are definitely high risks that are associated with the technology. Very recently, the former chairman of Comex, Donna Redel has expressed her views regarding the DeFi and has said that DeFi is a double-edged sword and that it may be a dangerous game for investors. She said that without any proper self-regulation, the industry is a subject to regulatory examination and to some extent can hamper its reputation.
Vitalik Buterin Advises to sit out
The CEO of Ethereum, Vitalik Buterin had also reciprocated similar views. In a tweet on 14th August, Buterin said that it wasn’t necessary to participate in this hot DeFi carnival. Unless people understood its underlying concept, Buterin advised that it was wise to sit out or participate with only small amounts.
Again the founder of Compound Finance, Robert Leshner also said that some DeFi platforms must stop launching petty meme games and need serious self-regulation. His response was stimulated by Spaghetti.money which collected almost $500 million after 36 hours of its launch.
Most of the Dapps are not Legally Compliant
There have been many instances where critics have expressed that DeFi may be another overrated just like the Initial Coin Offerings (ICOs) Boom in 2017. A representative from the
law firm Anderson Kill, Preston Byrne said that they are just merely experiments in the finance world. He added that most of them are not legally compliant but this doesn’t mean that they won’t be in future. But there’s no doubt that DeFi is currently increasing in popularity.
