Barriers to the Mainstream Adoption of DeFi and How CIAN Drives DeFi Mass Adoption

DeFi is under-utilized when taking into account its applications and use cases.

Thumbnail image

Introduction

Decentralized finance, or DeFi, is a new industry in the world’s financial systems that is quickly gaining ground despite the current market crisis brought on by recent worldwide inflation. DeFi has played a crucial role in driving the adoption of cryptocurrencies by offering permissionless, transparent, and decentralized financial systems that have given rise to several additional blockchain use cases.

Through blockchain technology, decentralized finance eliminates intermediaries, enabling individuals, corporations, and retailers to conduct financial transactions. DeFi aims to replace intermediaries and institutions with a network of decentralized blockchain players through peer-to-peer financial networks, smart contracts, and cryptographic security protocols.

According to DefiLlama, the total value locked across all DeFi markets, including staking, borrowed assets, liquid staking, vesting, and pool farming, is currently a little over $74b, which is less than 6% of the almost 1 trillion market capitalization of the entire crypto space.

Additionally, Nansen reports that since 2020, the TVL of DeFi has increased by more than 6,900%. Since the beginning of 2021, it has climbed by 264%. However, since the beginning of 2022, TVL in DeFi has decreased by 76%, mainly because users lost trust in the system due to the market crisis that rocked the entire crypto space that year. The same source also states that despite challenging market conditions, the number of DeFi customers has increased from 4.7 million at the beginning of 2022 to more than 6.5 million. But compared to the billions of users in the traditional market, this is virtually nothing.

DeFi TVL

But have we explored DeFi to the fullest extent possible, or are we only scratching the surface? Has the technology been broadly adopted, or have any restrictions been brought on by apparent barriers to entry? How easy is it for the typical user to utilize DeFi and profit from it?

The Challenges

DeFi is under-utilized when taking into account its applications and use cases. The versatility, scalability, robustness, transparency, and cutting-edge technology that DeFi provides are sufficient to propel its usage to the point of mass adoption, yet several obstacles exist.

Traditional investors have become increasingly interested in the possibility of earning returns on digital assets as cryptocurrencies are widely adopted across the global financial markets. DeFi yield opportunities have enabled investors to generate passive income on their digital assets instead of waiting for the investments to increase in value on the open market, much like yield generation in traditional markets. But how many traditional investors have adopted DeFi and used the existing DeFi protocols?

DeFi provides numerous ways for users to generate yield on digital assets through staking, lending, or yield farming. While it may be one of the most popular sectors within the crypto market, it is dominated by experienced crypto users. There are several barriers to broad acceptance for the typical non-technical user, creating a bottleneck in its utilization.

DeFi is currently suffering several difficulties that have limited its mass adoption, including the following:

1) Complex user interface and onboarding

Many DeFi protocols currently have user interfaces that are challenging for someone who is not a crypto native to understand. First-time visitors to these platforms need to be made aware of the precautions that should be taken for each transaction, the risks associated with any actions they take on-chain, or what they need to do first or last.

In the past, there have been instances of people losing their money because they misunderstood the DeFi wallet’s user interface or the protocol itself. The way investors engage with wallets, exchanges, and protocols is not a simple, intuitive process, and this scares users and investors with basic knowledge away.

Additionally, most DeFi protocols include jargon and terms that may be difficult for the typical user to understand. If words like “providing liquidity,” “liquidity pools,” “EVM,” “liquidation,” etc. are not adequately explained, new users may become confused.

DeFi wallet setup, lending, and borrowing may not appear complicated to someone who is already familiar with cryptocurrencies. However, it can be a complex undertaking for someone unfamiliar with that area. Someone might give up before they even begin due to the lengthy “gas fees” hexadecimal addresses. Applications that are simple to use are needed so that new users can easily manage many accounts and positions.

2) Non-Education

Most DeFi platforms are more concerned with boosting yields, growing the value of their tokens, forming strategic partnerships, and developing better solutions to DeFi’s existing problems than educating potential users. However, without effective user education, these fantastic products will not be able to gain significant popularity.

Some pertinent areas that these platforms can concentrate on include educational resources on the fundamentals of blockchain, their platform’s concepts and principles, the basics of DeFi earning, and other related and unrelated issues to their platform and DeFi.

In addition, most protocols and platforms don’t offer guides on how to use them. Some of those that provide tutorials either write them in complex technical jargon that is challenging for the typical technical user to grasp or offer brief or badly written tutorials that do not provide in-depth specifics of the platforms.

3) Difficulty in generating HIGHER yields

There are an astounding number of ways to earn profit on-chain because of the recent growth of Decentralized Finance (DeFi). However, the finest investment strategies are frequently inaccessible to individuals with low blockchain/coding skills because many necessitate complex and multiple steps and processes.

Further, some yield techniques may necessitate interaction with several DeFi platforms, ranging from lending to staking to Decentralized exchange platforms, and may require interaction with various networks or chains as well. For instance, you can borrow money from Sturdy Finance and use it to stake in Aave or Lido Finance. Some, however, need you to write short lines of code to increase your yield, automate your repetitive entries, or optimize your positions. One example is developing an extremely quick executable bot for liquidations or employing bots to execute flash loans for arbitrage reasons.

For new users who have never used a software wallet, the sheer number of blockchain networks, each with its own DeFi environment, may be overwhelming.

4) Smart contract, security, and reputation challenges

The DeFi industry is frequently seen as a space where everything goes, in which anyone can launch a startup with big promises to investors, only to scam unsuspecting investors out of their money and leave them holding worthless tokens or frozen assets.

Smart contract flaws and vulnerabilities, on the other hand, reduce the broad acceptance and popularity of well-intentioned DeFi protocols and their liquidity. A smart contract is a self-executing, computerized agreement between two parties. It is a blockchain platform algorithm that allows transactions to occur without centralized mechanisms or intermediaries.

DeFi is open source, making its smart contracts more susceptible to hackers than traditional systems shielded by layers of security surrounding a private source. Logic mistakes, economic exploitations (such as taking advantage of undervaluation), flash loan attacks, and administrative risk (for contracts with changing parameters) are just a few weaknesses to which smart contracts are susceptible.

Vulnerability exploits are becoming increasingly common in the DeFi space. The Nomad token bridge was depleted of $160 million in cash. Also, in 2022 alone, Cointelegraph estimated that hackers had stolen $1.6 billion in funds from DeFi protocols. The lack of security in the DeFi sector discourages new users while also discouraging people who have been victims of protocol vulnerabilities.

Failed DeFi protocols have sent negative signals to investors in the space, crumbling the DeFi ecosystem further. Crypto natives believe that 2022 has been the most trying year for DeFi and the entire crypto space so far, where quite a number of projects was solid backgrounds crumbled. Incidents such as the Terra/Luna ecosystem implosion, Celsius collapse, and FTX bankruptcy, which left many DeFi protocols insolvent, collectively brought down the TVL in DeFi.

Users’ market sentiments and withdrawal rates from various DeFi protocols rise as a result of these collapses. It also undermines investors’ confidence in these items.

5) Regulatory Issues

In an industry as unregulated as decentralized finance, project founders can sluice away funds from the protocol they established before pulling the plug a year later, leaving their users in huge losses.

Crypto investors have been calling for tighter regulation from relevant government and financial sector organizations following the recent failure and collapse of well-known projects in the DeFi market.

Although regulation has potential advantages for the DeFi sector, it also runs against to the fundamental concepts of decentralization, which enable the sector to maintain autonomous ownership without a central owner or authority.

The decentralized nature of DeFi will also make it difficult for regulators to maintain some degree of control within the industry. In DeFi, smart contracts handle almost everything such as staking and swaps with a DEX while users offer liquidity for the trading pairs while.

For instance, regulators can only take minimal or no action to stop an anonymous team from jacking up a token’s value before removing liquidity from DEXs, a practice known as “rug-pulling.”

How CIAN is driving mass adoption of DeFi products

What is CIAN?

CIAN is an automation tooling platform that allows users to swiftly build, manage, and optimize complex multi-protocol yield positions/strategies.

CIAN is an open automation platform that allows you to easily compose and automate your blockchain tasks utilizing extensive automation tools. CIAN redefines the way users perform DeFi tasks. CIAN serves as a gateway and automation platform that enables users to complete complex operations in yield farming, lending, borrowing, and other activities in DeFi platforms with only a few clicks, providing quick access to on-chain yield and composability.

For example, you can open a borrow or lend position on Aave directly on CIAN without visiting the Aave website. What’s more interesting is that CIAN allows you to perform tasks like auto-borrow, auto-repay, flash repay, etc., to manage your loan automatically.

CIAN substitutes complex & time-consuming manual operations of your DeFi task with simple ‘task definition’ of a few clicks through automation, helping you to save up to 80% of your manual processes and increase your capital utilization by up to 60%.

Through extensive integration and the development of advanced automated yield strategies, CIAN seeks to create universal decentralized blockchain automation for everyone. As a starting point, it has chosen robust automation scenarios, such as automated strategies for staking derivatives (Liquid Staking) and Generic Automation Scenarios. For more information, visit the docs.

Overview of CIAN protocol

Yes, you read that correctly. CIAN also provides automated strategies for swapping, leveraged staking, yield farming, liquidity provision, and leveraged arbitrage. As a user, you must set up your decentralized wallet on the website, choose your trading strategy, deposit the necessary token, and execute the transaction. This one click will implement all underlying strategies, sometimes across multiple DeFi pool protocols, and produce a very high yield in the form of APYs. The following are all benefits that users obtain from Cian:

1. Allow users to add optimization tools to their position(s);
2. Allow users to add protective mechanisms to their position(s);
3. Reduce the manual operational complexity of users by up to 80%;
4. Increase users’ capital efficiency by up to 60%;
5. Protect the position(s) of users from liquidation;
6. Improved position protection when performing on-chain operations
7. Advanced and complex DeFi strategies with higher yields
8. Significantly increased the efficiency of your on-chain tasks

How CIAN is Pushing Mass Adoption for DeFi

1) Composability.

One of the fascinating aspects of the blockchain is its composability, which is the ability of multiple blockchain apps, such as decentralised exchanges (DEXs), lending and borrowing platforms, staking and yield farming platforms, and so on, to communicate and work with one another.

One of the founding pillars on which CIAN is built is the integration of major Dapps on mainstream blockchains. In this regard, CIAN has integrated a handful of platforms to allow users to participate in their favourite DeFi protocol from a single dashboard. The following are some of the protocols that CIAN has incorporated:

• Lending and borrowing: Aave, Benqi, Trader Joe
• Swap (DEX): Baguette, PANGOLIN
• Liquidity/farm: Axial, curve, pangolin, Trader Joe, Vector

Protocols integrated into CIAN

2) Education

Users’ education is something that CIAN Protocol values, and they place more emphasis on educating users who may not be familiar with the ideas behind DeFi, yield farming, and lending. The following are some of thoffer educational content:

1. First-time Tour: CIAN provides a walkthrough of the fundamental functions and call-to-actions users will encounter while using their product. Below are some illustrations of these introduction tutorials:

First-time tour pop-ups on CIAN app

2. In-app tutorials: CIAN provides tutorials for any section that might be challenging to understand. For instance, in the section on “automated strategies,” tutorials are provided for each strategy to assist users who do not know what these strategies entail or how to utilize thAutomated em

Automated Strategy tutorial on CIAN

3) Automation

Building a global, decentralized automation infrastructure for rapidly expanding blockchain ecosystems is CIAN’s long-term goal and commitment. The driving force behind it is that without support from extensive automation, it would be challenging to foresee the widespread adoption of exist3543ing blockchain ecosystems due to issues like fragmentation, low efficiency, high entry barriers, laborious and complex on-chain procedures, etc.

Both no-code users and expert developers may simply compose and automate their on-chain actions in a decentralized way with the help of powerful CIAN automation tools by turning complex manual executions of typical on-chain tasks/strategies into a simple, easy-step description process.

Some of the automation processes on CIAN include

1. Automation scenarios are the various automation processes for different tasks and operations in other aspects of DeFi. They include

• Auto borrow
• Auto repay.
• Flash repay

2. Automatic strategies: These strategies produce high yields when applied to various protocols. It consists of borrowing, lending, staking, and other activities used to increase DeFi yields. The automated strategies that CIAN been implemented include

• Leverage staking
• Leverage arbitrage

3. Position building: These are the automated techniques that users can utilize to quickly and easily develop complex investment positions across single or multiple protocols. An example is:

• Borrow to farm — A strategy which allow users to carry out standard yield farming with the aid of assets that were borrowed against their chosen collateralized asset. Read more here

4) High yields

CIAN’s automated DeFi strategies are the fastest, simplest, and most efficient way for investors to maximize complex multi-protocol yield strategies while remaining entirely decentralized. These strategies result in extremely high yields of 30% to 50% APY High-yieldepending on the combined strategy used). For example, the sAVAX/AVAX folding strategy on CIAN combines three separate protocols — AAVE V3, Benqi, and Platypus — and provides users with a stunning 28% APY.

High yield strategies across various protocols, previously available only to the most experienced users, are now available to anyone through CIAN. The yield strategies CIAN offers can help improve capital utilization by up to 60%.

Conclusion

As early adopters, we’re only beginning to scratch the surface of DeFi’s enormous possibilities. Active sector expansion will lead to significant growth over the coming years, but only if such growth takes into account practical solutions to the obstacles preventing DeFi’s widespread acceptance.

The recent growth of Decentralized Finance (DeFi) has introduced an incredible number of new ways to generate income on-chain. And as the industry expands, many more methods to profit will be uncovered. However, a variety of them will not always resonate with simplicity; in fact, as more protocols and blockchain networks are introduced, it will grow more complex.

Due to low efficiency, a high entry barrier, tedious and complicated on-chain procedures, fragmentation, and difficulty to realize composability, participation in the sector will become more challenging as DeFi expands. As a result, people with low blockchain or coding skills will frequently have limited access to the greatest assets.

CIAN has led the way in the area of DeFi automation, which will aid in the wider adoption of DeFi. CIAN may end up serving as the foundation of next-generation blockchain systems by the time the overall blockchain ecosystem is sufficiently developed with global automation capability.