MakerDAO, referred to as DeFi central bank, partnered with Centrifuge, a financial supply chain, on 22 April to complete the first asset loan in decentralized finance. Centrifuge helped a loan pool, New Silver, to create a real-estate reimbursement.
That marked a milestone and breakthrough for decentralized finance. DeFi will help financial institutions operate all day long on smart contracts with no trues problems. Moreover, customers will access loans on low interest rates and instant liquidity through minimum capital charges. That will contribute to an increased market cap for DeFi.
Individuals consider DeFi as Blockchain’s second-leading large-scale app, and it has attracted many financial institutions. Recently, Bank of America declared that it prefers Ethereum to Bitcoin due to the DeFi platform.
However, at the moment, DeFi seems not ready for old-style finance. Users may suffer from high transaction charges, inadequate privacy protection, and performance inefficiencies.
Privacy Protection – a DeFi Challenge
Privacy remains a bottleneck in most transacting platforms. However, for DeFi, it is an opportunity. You probably know how banks, institutions, and traditional investors value privacy protection. They can hardly trust their assets on an open platform.
Privacy protection would promote DeFi lending to achieve more acceptance and application. Moreover, it will speed up chain credit lending. The current decentralized finance lending is over-collateralized due to inadequate user info. With privacy protection, users will provide sensitive information like behavioral and financial records to produce credit evaluations without disclosing things openly. The calculated credit could then facilitate user credit loans.
Privacy will also prevent investors from hackers. Keep in mind that the current DeFi network is public. Anyone, including attackers, can track user movements. No one can attack or arbitrage customer’s info with privacy protection.
For new markets, decentralized finance will need to update its privacy protection protocols. That will attract targets that prefer a risk-free environment.
True enough, decentralized finance has been widespread and revolutionary. However, the platform will have to upgrade and develop privacy protection to meet future demands. Besides benefiting users, that move will promote the DeFi platform. If decentralized finance puts effort into privacy protection, you can expect the best financial services.