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When mass adoption? Key question as DeFi hits a million users.

Dune Analytics, a powerful tool used to query, extract, and visualize vast amounts of data on the Ethereum blockchain released a report on Friday which showed that the decentralized finance (DeFi) ecosystem has attained over 1 million unique Ethereum addresses. This number is more than a ten times increase from a record of 91,000 addresses on Dec. 6, 2019.

The growth of the DeFi sector has been undeniable, with applications in this sector recording high returns and transactions. However, experts caution that this growth should not be interpreted as a sign of widespread adoption. For DeFi to achieve mainstream use, many of the emerging vertical’s supporters may have to re-strategize their outreach and communication strategies.

DeFi users growing by the day

The report by Dune Analytics is compiled by aggregating the total number of addresses that have used the popular DeFi protocols. These calculations interpret users as unique addresses, meaning that the number of addresses opened in these protocols has exceeded the million mark.

This practice of conflating addresses as users may lead analysts to dubious figures since many DeFi users commonly deploy multiple addresses to protect their privacy while making transactions on Ethereum’s public address.

Brian Flynn, co-founder of Rabbithole, a startup that helps provide incentives to participants of DeFi said that the actual number of DeFi users might be lower. Flynn added that the real metric that matters shows that the number of unique users is only 10-15% of the announced number.

Reaching mass adoption

In order to reach a million users and more, Flynn advised the need to attract a large number of users which can be achieved through a killer application focused around speculation, similar to one applied by the CeFi trading platform, Robinhood, which has received a high participation during Covid lockdowns.

Sustainable success for DeFi will however be achieved by devising ways to incentivize users to participate in governance and infrastructure-layer elements. Flynn said that although users understood how to trade tokens on Uniswap they lacked knowledge on how these protocols work under the hood. He also said that only a small number of all addresses on Uniswap have ever supplied liquidity, while only a small percentage of all users who supplied assets on Compound to earn interest borrowed to take out a loan.

Real adoption will be achieved by increasing the number participants as opposed to speculators in an open economy. Flynn also revealed that Rabbithole was running several campaigns with leading DeFi platforms to incentivize richer protocol participation from users in exchange for governance tokens. Although the change cannot happen overnight, Flynn advises that the most important thing to be done is educate with real hands-on participation in the DeFi networks.

Attracting new users is key

Another way of reaching adoption would be to attract a different kind of user. According to Patrick Rawson, a co-founder at DAO engineering and blockchain experimentation outfit Curve Labs, the current user experience in DeFi is tailored to a very specific demographic. The users are mostly younger, male, technically savvy, and in search of profit.

For DeFi to therefore reach more users, they might have to consider new outreach strategies that better empowers users to seek desired outcomes.

Rawson advised that DeFi should tailor itself to localized institutional structures that reflect local values such as Sarafu credit, a community currency experiment in Kenya that formerly partnered with Bancor.

Flynn agrees with Rawson by adding that putting focus on profits might be a restrictive way of explaining DeFi and added that participants in the ecosystem should discuss more about how cryptonetworks and decentralization are the new ways of building organizations, as it will play an important role in influencing friends’ and families’ involvement.

image courtesy of pixabay

Edward Nored

Edward Nored

Edward is a naturally curious BTC lover with a deep interest in blockchain, fin tech, fields which he dedicates his time to researching.


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