The secret third option in decentralized finance | Opinion

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As a seasoned developer with over six years of experience in smart contract programming and blockchain technology, I wholeheartedly agree with the perspective presented here. In my journey through the labyrinth of DeFi, I’ve come to understand that the notion that strong UX can only be achieved at the expense of decentralization is both false and perilous.

Having witnessed firsthand the fall of centralized entities like Three Arrows Capital, Celsius, and FTX, it’s crystal clear that their limitations in reliability, transparency, and accountability can have disastrous consequences for users. On the other hand, decentralized protocols like Aave, with their transparency and on-chain visibility, provide a beacon of hope and trust.

I’ve seen the evolution of DeFi UX through smart contract improvements, Layer-2 solutions, and intuitive wallet designs that don’t require sacrificing decentralization. Projects like Uniswap’s wallet and Unichain L2 prove that it can be done. The challenges we face are not insurmountable, and I am actively working to solve them through my work at Union.

When people criticize DeFi for being too complex, they often forget that TradFi isn’t a walk in the park either. Managing multiple accounts across different exchanges or moving assets from one brokerage to another is hardly a smooth experience. DeFi aims to simplify these processes while introducing transparency, trustlessness, and user control. Its UX may not be perfect today, but it’s improving every day.

The future of finance should not involve choosing between centralized convenience and decentralized security; we need both. I am optimistic that the UX gap in DeFi will shrink, and one day users won’t have to make that choice. Instead, they’ll enjoy a seamless, secure, and transparent experience—and that’s why I continue to focus my efforts on building that future.

To lighten the mood, let me leave you with this joke: Why don’t programmers like nature? Because it has too many bugs! But rest assured, in the world of DeFi, we’re working tirelessly to eliminate those bugs and bring you a more enjoyable user experience.

It’s frequently suggested, yet potentially risky, that user-friendly experiences (UX) in Decentralized Finance (DeFi) can only be attained through some level of centralization. This notion might seem logical since platforms like Coinbase and Binance are renowned for their straightforward interfaces for common users. However, centralized systems often struggle in aspects such as transparency and security. A more decentralized approach could potentially address these issues while still offering a user-friendly experience.

In an effort to make decentralized finance (DeFi) projects more appealing to a wider audience, some may choose to emphasize user experience (UX) at the expense of transparency and security. However, sacrificing security for accessibility could lead to problems down the line.

The belief that user experience (UX) is crucial for the success of web3 projects has led some DeFi developers to feel they must compromise on decentralization, which contradicts the fundamental principles and purpose (raison d’être) of DeFi.

The perspective you’ve presented seems to overlook the importance of decentralization, as it need not and should not be compromised in pursuit of a more seamless user experience within DeFi. Instead, we strive for a harmonious blend of both.

A reminder of what happens when we sacrifice decentralization

It’s been evident that centralized entities within cryptocurrency have consistently reached their breaking points, as incidents such as the demise of Three Arrows Capital (3AC) and Celsius have shown. These instances underscore how centralized structures often fall short in delivering the dependability and transparency that users seek, and can even lead to catastrophic outcomes. The collapse of FTX serves as a case in point, where centralization facilitated a higher level of secrecy, concealing risky decision-making from public scrutiny. This veil of opacity sent ripples of shock throughout the industry when billions of user assets mysteriously vanished. Unfortunately, FTX users were oblivious to these risks until it was too late.

As a crypto investor, I’ve come to appreciate the transparency and accountability that decentralized protocols offer. Unlike their centralized counterparts, all transactions are openly recorded on the blockchain, providing me with valuable insights and peace of mind. This level of visibility is something I wouldn’t find in traditional financial systems. DeFi protocols like Aave, which have been operational since 2017, demonstrate the longevity and effectiveness of these decentralized solutions, proving they are here to stay.

Decentralized systems aren’t infallible – as demonstrated by the collapse of Terra in 2022, even decentralization doesn’t ensure prosperity. However, a key advantage is that when these decentralized protocols falter, they do so transparently. Users are given some level of insight into the system and the power to hold those systems responsible if something appears questionable.

Decentralization isn’t incompatible with UX

In the context of Decentralized Finance (DeFi), it’s evident that user experience (UX) should not overshadow decentralization. However, this does not necessarily mean it must be a compromise – rather, it can be achieved without sacrificing the essence of decentralization.

From my perspective as an analyst, it’s evident that the landscape of Decentralized Finance (DeFi) is undergoing a remarkable transformation. Innovations such as smart contract enhancements, Layer-2 solutions, and user-friendly wallet designs are revolutionizing the DeFi User Experience (UX), all without compromising on decentralization. This has been clearly demonstrated by projects like Uniswap’s wallet and Unichain L2.

As a seasoned developer who has spent years working in both centralized web2 applications and decentralized DeFi solutions, I can confidently say that the challenge of creating a strong user experience (UX) in DeFi is indeed formidable due to the relative youth of the industry. Centralized apps, with their foundation in decades-old web2 structures and crypto features added as an overlay, offer a smoother user experience today because developers can leverage their extensive web2 UX knowledge. In contrast, decentralized frameworks present unique challenges such as scalability, fragmentation, and compliance issues that are not found in traditional web2 apps. However, I am optimistic about the future of DeFi, as these challenges are actively being addressed and solved by a growing community of developers who are passionate about pushing the boundaries of what is possible with blockchain technology.

What are we measuring DeFi up against?

As a user who has navigated both traditional finance (TradFi) and decentralized finance (DeFi), I have often found that determining good versus bad UX is indeed a crucial aspect to consider, especially when it comes to DeFi due to its complex nature being frequently criticized. However, I must admit, TradFi hasn’t always been the easiest to navigate either, having faced my fair share of challenges in figuring out user-friendly interfaces within traditional financial systems. It’s essential for both sectors to prioritize UX improvements so that more people can access and benefit from these services with ease, regardless if it’s TradFi or DeFi.

Navigating numerous accounts across diverse trading platforms, or transferring assets between brokers, is often a bumpy journey. Decentralized Finance (DeFi) strives to streamline these tasks by enhancing interoperability, all while providing additional advantages such as transparency, trustlessness, and user control. Although the user interface might not match that of web2 platforms at present, it’s rapidly improving. As more tools and protocols evolve, so will the user experience.

It can’t be this or that. We need both

In the realm of finance, it’s crucial that we don’t have to compromise between ease of use provided by centralized systems and the security offered by decentralized ones. Instead, we should insist on having both, given our experiences with the shortcomings of centralized institutions and the growing importance of transparency.

The divide between user experience (UX) in Decentralized Finance (DeFi) is narrowing. While it might not disappear overnight, eventually there will be a time when users won’t have to compromise between ease of use and security. Instead, they’ll enjoy the benefits of both, and that’s why our efforts should be directed towards creating that future.

Karel Kubat

Karel Kubat serves as a co-founder for Union, which represents the first reliable bridge operating on zero-knowledge technology without the need for trust. Since 2016, Karel has devoted himself to writing smart contracts, initially focusing on Solidity and later moving on to Rust and Go in 2018. With his extensive technical knowledge and Systems Engineering background, Karel designed the Inter-Blockchain Communication (IBC) Protocol on Substrate (Polkadot). Now, he is dedicated to fostering interoperability, security, and trustlessness within web3 and beyond through Union’s efforts.

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2024-12-29 16:14