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The 2020 DeFi Blueprint

Posted by
Dhawal Shah

Increasing DeFi’s utility

The DeFi space has been steadily emerging over the last couple of years. From a total value locked (TVL) of a couple of million dollars, it has reached a whopping 827M (at the time of writing). What does this mean for the overall crypto and blockchain community? 

Although a popular story of how DeFi can be a great balancer and perhaps help get the current 1.7 billion unbanked access to banking facilities. A lot of the success will be derived from reaching out to the existing centralized finance banking users.

The current unbanked population is often ignored. Since it is rarely profitable (without government support and subsidies) to support and service them.

The 2020 DeFi Blueprint

1. Onboarding new users

An overwhelming majority of people around the world haven’t even heard of DeFi, let alone use it. For DeFi to be mainstream, the community needs to first address the price volatility of the crypto asset prices they purchase. Hence the need for stable coins and onramps.

The current ones that are available are USDT, DAI, and others that are all pegged to the USD. Projects offer a variety of stable coins, like the ones pegged against the Euro and British Pound Sterling. 

The COVID-19 pandemic has seen an even stronger pace of movement towards digital payment solutions and new dapps may integrate with Apple Pay, Google Pay, or Ali Pay for ease of transfers. These products would then cater to an entirely new set of users. Ones that are not comfortable with volatility, and also require the comfort and familiarity of their home currencies.

2. Intuitive, engaging, and enjoyable interfaces

I enjoy spending time on Instagram, its fun, easy to use, and relaxing. I am sure, most people start off by having a look at the stories. DeFi developers need to perhaps think of Instagram while developing their applications. 

We kept this in mind while developing Frontier. With a goal that we can make DeFi, simple, safe, and mobile.

Most new users are pleasantly surprised when they realize that they are earning a higher interest in USD against what they would in their savings account. Besides, this would perhaps be only the starting point. DeFi has a lot more to offer than just lending, but to begin with, this can leave a positive impression. 

3. Traditional finance

Traditional finance will continue to dominate. For DeFi to emerge as a credible alternative, the community would need to find ways of integrating with CeFi (Centralized finance). This would mean working with trusted third party custodians that act as a bridge between DeFi and CeFi. These custodians can integrate with banks and offer a suite of services, bypassing the challenging aspect of onboarding new users.

The current estimated DeFi users and value locked are 60,000 and 827 million (As of 11th May 2020) respectively. These numbers seem minuscule in comparison to the 6.1 billion people (As per the World Bank Findex Survey) that have a bank account with many many trillions of assets under management. The DeFi space could get a massive shot in the arm by bridging the gap.   

4. Development tools for furthering innovation

Existing users need to open source their development journey. Leading to further development and innovation within the DeFi ecosystem. Frontier has taken a lead by offering TxLink to developers. Which allows for wallet composability within existing protocols and other DeFi dapps.

5. Security

One of the significant concerns within the DeFi space is security. How do you ensure that your users’ balance is safe? The hacks in 2020 with bZx, DForce, and the Maker DAO forced liquidations have done enough to erode investor confidence. The last thing one would want is to have user funds stolen or hacked.

Although it can be hard to believe, one of the simplest and yet the most common ways funds are stolen is when users are tricked into sharing their private keys. Since security is of paramount importance to users, Frontier has managed to ensure that users can manage their assets without sharing their private key. With this as a mission, at Frontier, we ensure that users don’t have to share their private keys and manage their assets securely. 

6. Bridging CBDCs and DeFi

CBDCs have been spoken about and discussed for a while, with a lot of countries announcing launch plans.  However, last week, the global business community was buzzing with the test launch of the digital Renminbi in several cities in China. This would further additional development within the Chinese DeFi ecosystem. The community needs to positively look at this since several countries would expedite the launch of their respective CBDCs. 

The future looks bright

As a long term believer, Frontier expects that we shall continue to see a gradual convergence and this will perhaps help us get to the next billion.

This is the first of several guest articles on the state of DeFi, we shall continue to share our learnings on our journey.  

About the Author: Dhawal Shah is the Head of Business Development at Frontier, a mobile app that allows a novice to a professional makes the most of Decentralised Finance, he can be reached at Twitter or via email. To learn more about Frontier, follow this twitter handle.

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