Centralized exchanges are out of step with the core of cryptocurrency, but DeFi still has a way to go.

The Following opinion editorial was created in collaboration with BitcoinCEO of.com Dennis Jarvis.

In 2022, people are beginning to return to the core principles and tenets of cryptocurrency. Decentralized DeFi is becoming a popular option, but it’s not yet ready to replace centralized services.

This Article will discuss two main challenges: making DeFi more user-friendly and improving its performance in comparison to centralized services.

The UX Problem and How It can be solved

Developers are often forced to create experiences for users that are fundamentally different from what they are used to from the custodial system web2. This creates friction and makes it more difficult.

Smart Design, education, incentives and motivation are all crucial ingredients to solving the UX issue.

It is essential to design products that are as easy to use and familiar as their web2 counterparts. Bitcoin.com is the self-custodial multichain cryptocurrency wallet application. It has been providing intuitive experiences since long, even for simple actions such as sending or buying cryptocurrency. Advanced features like our DeFi features can also be integrated directly in the app. It is essential that the user experience does NOT differ from web2 even though web3 rails are only used in part.

Education and incentives play an important role in this area. Education will build trust in cryptocurrency and prepare users to take the plunge. Incentives can be a great motivator to start something new.

Fortunately the cryptocurrency space is the ideal space for education, incentive and technology. We have written extensively about crypto loyalty tokens and the importance of getting them right. And we have also considered how they could be integrated into the Bitcoin.com ecosystem.

Now our own VERSE ecosystem token has been launched. We can now use monetary incentives to encourage people to access decentralized financial services. They can then enjoy the benefits of CeFi (centralized) finance. One way we plan to reward newcomers with VERSE tokens that will help them back up their wallets.

CEX has just launched its Education Program to reward those affected by the insolvency of centralized cryptocurrency companies and encourage decentralized finance adoption.

The Performance Problem

from @ByzGeneral*

These views were shared right before the FTX implosion. Though these observations may have changed over time, they still may hold true. There is now an opportunity to replace centralized exchanges (CEXs) with decentralized finance (DeFi) products for liquidity, volume and order matching.

The cryptocurrency industry is facing a challenge: many of its biggest traders, market makers, supporters and advocates are unable or unwilling to trade on decentralized platforms. This creates a feedback loop which reinforces reliance on CEXs.

At one time, CEXs were seen as a temporary solution until cryptographic technologies could take over. As the space gained in popularity, I observed that it was becoming complacent and distracted by the influx of funds. It was like this: “We’ll address those issues eventually.”

Addressing The Execution Challenge

I believe that the most basic cryptographic tools are available. To illustrate, a DEX could compete at an acceptable level with a CEX by using a layer 2-based exchange such as dYdX. This is a zero-knowledge proof system which can execute trades quickly enough to rival the response times of CEXs. Presently, “the existing dYdX product processes about 10 trades per second and 1,000 orders/cancellations per second, with the goal of scaling larger orders.”

The only thing missing is adequate liquidity. Better liquidity is a result of market creation which is more profitable and efficient. Market makers should use order books to attract them and provide the necessary liquidity for DEXs to contend with CEXs.

Soon, liquidity will be available and it’s now obvious (again!). We cannot rely on centralized brokers for trust. It is essential that the major players in cryptocurrency collaborate to transition from CEX protocols to DeFi protocols. Bitcoin.com is an example of a company that takes pride in providing comprehensive DeFi solutions. The Bitcoin.com wallet is a vital tool that allows newcomers to securely interact with decentralized finance.

The Future Of DeFi

Don’t let the flaws discourage you. The truth is, all of DeFi’s flaws are minor when compared with its strengths. DeFi provides you with the freedom to manage your assets independently, while also enjoying the trust of central financial institutions. This includes trading between assets and earning returns. You can also borrow against your assets. Since the dawn of financial transactions, trusted intermediaries have been necessary. The DeFi problem can be solved, which is in contrast to the traditional financial problems. DeFi is ultimately the answer to all the issues in traditional finance.