Jun 8, 2020
The Use of DeFI Could Accelerate
By Marko Vidrih on The Capital
As the technical infrastructure behind decentralized finance (DeFi) continues to improve, this sector is likely to take its share from centralized lending and trading centers, according to Kyle Samani, Managing Partner at the cryptocurrency investment firm Multicoin Capital. However, major challenges remain for DeFi protocols before this can become a reality.
In his recent essay, Samani wrote that a “gradual change of function” in the growth rate of DeFi platforms should be expected within the next 24 months, as infrastructure improves to the level where it can realistically compete with centralized, defined as CeFI.
While admitting that current DeFi technology lags behind CeFi in several key aspects that are important to users, including the slower speed with which it operates and the lesser amount of leverage available, Samani said that there are still great opportunities in the sector.
“Even while DeFi protocols face structural disadvantages for most users and traders, they still serve certain niches better than CeFi,” said Samani, suggesting that so — called perpetual futures contracts (“perps”) for traders could be one of those opportunities:
“I believe there is a large market today for trading non-custodial perps. DeFi perps aren’t going to displace CeFi perps anytime soon because of the reasons highlighted above, but I think that there is some meaningful percentage of the market that would trade on a platform that offers DeFi perps,” said Samani.
In addition, he said the way to find out when DeFi won the battle against its centralized competitors will be “when the price discovery shifts from centralized to decentralized headquarters”.
However, Multicoin’s Managing Partner also offered a very reassuring realism in his essay for those who believe that the leadership of the DeFi sector is around the corner.
Author: Marko Vidrih
Featured image credit: Unsplash
