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Pioneers and insiders of the decentralized finance industry strongly believe they are the vanguard of a new and better way to handle financial transactions. Still, it doesn’t mean they have nothing to learn from centralized finance companies. While CeFi has the advantage of more familiarity and a long history, those aren’t the only reasons it can still outperform DeFi when it comes to attracting new users.
It’s not a disservice (or disloyalty) to DeFi for its leaders to look closely at what users rely on and value in CeFi services. Below, nine members of Cointelegraph Innovation Circle discuss lessons DeFi companies would be wise to learn from CeFi companies, and how doing so could boost their chances of success.
Trust is earned, not given
The recent crypto carnage has largely been within CeFi and has fractured years of trust CeFi companies built with users — trust that must now be repaired. Though DeFi’s structure is inherently immune to some of CeFi’s missteps, DeFi companies should not assume user trust upon inception. Instead, they must prove they deserve it and operate with a mindset that it must always be earned. – Hugo Lee, Haru Invest
Standardization, simplicity and education can grow an industry
CeFi has shown confidence and execution when it comes to commercialization, where the user experience and marketing are priorities. DeFi could learn from this. Adopting more standardization, simplicity and education around all aspects of the industry could attract more new user onboarding and understanding. Collecting customer information (Know Your Customer), for example, is likely to become mandatory in the near future. – Ilias Salvatore, Flooz XYZ
Easy-to-use platforms can help attract and retain users
DeFi companies could learn from CeFi companies about the importance of user experience and interface design. CeFi companies have invested heavily in creating easy-to-use platforms that attract and retain users, and DeFi companies could benefit from incorporating similar design principles into their products. – Theo Sastre-Garau, NFTevening
Accountability is essential
CeFi companies invariably have strong CFOs and, in many cases, a regulatory compliance team, whereas, in the DeFi world, these can be rarities. DeFi companies often tend to prioritize tech and marketing over accountability or a system of checks and balances. When large sums of investor funds are involved, this can institutionalize moral hazard, as we’ve seen with companies like FTX. – Jason Fernandes, AdLunam Inc
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Users value easily accessible education and assistance on platforms
In recent years, the leading platforms in DeFi have greatly optimized their UX/UI designs with the help of improvised search functions and DApps such as WalletConnect. However, providing more assistance to newcomers seeking to on-ramp their fiat to crypto would be a big win. This could be achieved through AI chat functions and discoverable educational materials on the main dashboard. – Sheraz Ahmed, STORM Partners
Scaling must be carefully planned and supported
DeFi faces scrutiny when it comes to liquidity and sustainable treasuries. We saw many DeFi companies focused on scaling incredibly fast — especially with overuse of leverage — without considering how they would realistically maintain and support scaling. This has heavily damaged DeFi’s reputation. We have seen this type of behavior in CeFi as well, but not in such a concentrated timeframe. – Megan Nyvold, BingX
Even the best platforms require strong customer support systems
CeFi platforms replicate traditional finance, with customer support on hand and intuitive interfaces that cater to the needs of beginners who prioritize simplicity and customer service. Though they’re transparent, permissionless, resistant to censorship resistance and self-sovereign, DeFi platforms tend to lack strong customer support. Prioritizing customer support is a practice that DeFi platforms can learn from CeFi in order to become more mainstream. – Tammy Paola, Zerocap
You need a variety of service levels to appeal to a broad spectrum of users
DeFi protocols should be accessible to all types of users. Although it’s great to have decentralized custody over your assets, CeFi can offer a smoother investing process that appeals to everyday users. DeFi companies can bridge this gap by offering some streamlined products that mimic the smoothness of CeFi, while also providing advanced tools that cater to expert investors. – Wolfgang Rückerl, ENT Technologies AG
Cybersecurity is an essential concern in every industry
DeFi must learn the importance of strong security measures. For instance, by implementing different types of authentication, thorough code review, solid research and bug bounty programs, DeFi platforms can decrease the risks of hacks and other security breaches. First, they must realize how crucial it is for a crypto project to be secured; then they must do what’s needed to mitigate the possible issues. – Bogomil Stoev, Seasonal Tokens
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.
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