Decentralized finance (better known as DeFi) has evolved from a concept to a major driving force in changing the current landscape of finance and ushering in a new era of modern finance marked by the introduction of decentralized, permissionless, and trustless financial products.
DeFi has made enormous strides in the financial space for an industry that is less than a decade old, and there is no doubt that this is just the beginning. There are still some issues to address in DeFi to ensure long-term scalability and improvement, with skeptics constantly pointing out the "hypocrisy" in various DeFi companies by having some degree of centralization, liquidity issues on some on decentralized exchanges and so on.
Tackling the Issues Hindering DeFi
DeFi was founded to address long-standing issues with traditional finance. A lack of protected personal data privacy, high user fees, and hacker-friendly centralized systems have all plagued the financial sector in recent years. Over the recent years, people have become dissatisfied with traditional finance and began looking for alternatives where they could keep their assets secure and with privacy without unnecessary middle-men. DeFi experienced a massive boom in the summer of 2020 and has seen rapid adoption to this day. However, there are still significant issues that have migrated from traditional finance, one of which is the issue of centralization.
While decentralized finance, in theory, should not be controlled by a single entity but by a group of individuals, the majority of decentralized platforms currently on the market do exactly the opposite. Many decentralized platforms give VCs and investors power to make critical business decisions on the platform in order to gain financial backing from investors, which is contrary to the concept of decentralization. While some DeFi platforms have attempted to implement active user governance, they have been unable to achieve full decentralization and limit voting power to insignificant decisions, while a central entity controls such platforms' strategic business direction. Such issues must be addressed in order to increase the rate of adoption.
Another issue impeding DeFi, particularly decentralized exchanges, is a lack of liquidity on the platforms. This leads to the loss of investor funds and creates a lack of trust in the minds of people who are new to the world of DeFi. Issues like this reduce the rate of DeFi adoption and can have an impact on long-term scalability. Several startups have begun to investigate these issues and are competing to be the first to create a "complete DeFi ecosystem."
A DeFi Startup looking to Solve these Critical Issues
Existing players in the DeFi ecosystem have begun to implement new ideas that will lead to them becoming the first comprehensive DeFi ecosystem. YFDAI Finance is one such startup. In May 2021, YFDAI launched SSGT, or the SafeSwap Governance Token, with the hope that it would play a critical role in achieving their vision of being the most comprehensive DeFi ecosystem. SSGT was created to address YFDAI's issues with centralization and liquidity on their DEX, "SafeSwap." SSGT will serve as a path to full decentralization for YFDAI by acting as a governance token, giving voting power to users who have at least 2500 SSGT while ensuring that YFDAI builds an active and sustainable user governance community.
SSGT also addresses the issue of insufficient liquidity on SafeSwap by enabling infinite liquidity via staking, farming, and other financial services offered on the platform. And to further the mission and vision, YFDAI began a wide-ranging SSGT airdrop campaign in June to help gain SSGT adoption as the project looks to refresh their DEX and start adding new projects to attract new users and transaction volume. Airdrops take place on the 26th of each month.
Theses moves by YFDAI are a welcome development in the DeFi ecosystem and the blockchain industry in general, as it has the potential to become very important in the coming years. SSGT is also traded on other exchanges and can be monitored on reputable websites such as Coingecko and CoinMarketCap.
Although DeFi is still in its early stages, its unique use cases and the purpose it serves can be seen as evidence that it will go on to play a significant role in the future of finance if these issues are addressed on time. It will boost long-term scalability hopes by becoming a comprehensive ecosystem that is fully transparent, secure, decentralized, and offers an excellent user experience.
With the recent launch of SSGT, aimed at creating a complete DeFi ecosystem, YFDAI appears to be leading the way in the DeFi space, and we are all excited to see what the future holds for DeFi as a whole.