Decentralization can cure Crypto’s current diseases

The crypto industry is plagued by two challenges.

First, the market downturn – a temporary, albeit painful, challenge.

The second is the loss of faith in industry leaders, a much more fundamental and lasting challenge.

Both can be solved by moving to DeFi. The result will be a return to the very reason why crypto exists: truly independent finance.

Let’s be direct about why storage solutions fail. Cryptocompanies marketed themselves as industry experts and claimed to be experienced investors. They offered interest rates far above market rates to attract retail deposits.

The reality is that – just like so-called “professional” stock pickers – not all of these “experts” know how to invest money better than the average user. In fact, according to the Wall Street Journal, 85% of professional investors failed to beat the market average in 2021, up from around 65% the year before.

For example: Voyager became a listed company in 2019, claiming that “being public creates an environment that promotes trust and transparency, while giving investors an opportunity to invest directly in Voyager shares.”

The problem is that Voyager lacked real transparency. It failed to tell users that it had borrowed an estimated $ 650 million in their funds to the hedge fund Three Arrows Capital (3AC). When 3AC defaulted on its loan, the user funds that lay ahead of it in the 3AC loan disappeared, and Voyager began denying users access to their money.

Therefore, it is important that the entire crypto community remembers why the community exists in the first place: We hated expensive, greedy middlemen who took the investors’ money, but let them keep their bags when things went wrong.

Future crypto investors should eliminate these centralized custodians.

This brings us to the future of crypto: DeFi (decentralized finance).

With a DeFi wallet, users – not third parties – maintain control over their money. It’s not bankrolling because users already have their money in their possession, either on their hard drive, computer or phone.

However, DeFi is still in its infancy, and most of the available Web3 wallets are confusing, even for advanced users. Users jump between wallets or DeFi protocols, often unaware of their gaping security flaws. Other investors feel frustrated of outdated technology and poor user experience.

To gain traction and trust, DeFi-powered Web3 wallets must have the simple feel of a centralized service. Users will then get the benefits of DeFi – from control over the funds to high interest rates – without the typical DeFi protocol headache.

Developing effective, usable decentralized tools will not only help our industry to withstand these storage nightmares, but also help the crypto community rediscover what initially inspired the creation of crypto.

DeFi is the way we can re-establish confidence in the technology and welcome in the next bullish crypto spring.

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