Early in 2021, decentralized finance (DeFi) drove the explosive expansion of cryptocurrencies, but since then, the value of the crypto market has collapsed. Global markets and developers’ carelessness with regard to cybersecurity and (sometimes self-serving) inflationary token structures have both played a part. Too much DeFi has been built on tokens created out of thin air or tokens that lend money to other tokens at excessive interest rates, with little actual economic activity to support the yields promised. Second, there have been several security flaws, hacks, and exploits of DeFi contracts and bridges, and the majority of well-known DeFi platforms have been the victim of an exploit. Last but not least, DeFi is only supported by native smart contract platforms and tools due to the absence of a unified standard for defining DeFi contracts. This constrains DeFi’s potential for expansion, universal client support, and, eventually, acceptance. DeFi is most likely here to stay despite these setbacks. To be truly useful, it will need to undergo modifications and advancements. Several enterprises that promised returns but were not supported by any actual economic activity arose during the DeFi summer of 2021. Some of the yields had rates as high as 800%, and many of them were repaid by creating more of the same tokens at random.
Read more : How DeFi has contributed to its own collapse by ignoring security and using poor tokenomics.