We often hear about DeFi as the disruptor to finance, about billions in Total Value Locked. We awe at the opportunity for outsized, moonshot returns. The quickness of transactions paired with this notion of being free from banking gatekeepers really gets us going too! Let's be honest: are we truly talking about everyone? Or are we simply creating another club, newer, shinier, but just as exclusive?

Forgotten Voices Need Financial Access

The promise of DeFi, at least in principle, is democratized finance. Permissionless access, transparency, user autonomy – these aren’t just libertarian dream words, they’re an immense redistribution of power. A shift to whom? For too long, traditional finance has racially and systematically discriminated against marginalized communities. Redlining, discriminatory and predatory lending, and the lack of access to basic banking services aren’t just unfortunate coincidences. They are purposeful design elements of a system, the purpose being to keep some people out.

DeFi could be different. Imagine a rural, single mother in a Nigerian village. Now she uses a DeFi platform to access microloans at reasonable interest rates, avoiding the exorbitant fees and discrimination she often faced from local lenders. Imagine a refugee family, displaced by war. For them, remittances come instantly through a stablecoin without incurring the high cost of existing money transfer companies.

I’ve talked to people who have lived this reality. Consider Fatima, a Kenyan artisan who relies on a DeFi lending protocol to borrow capital for her business. In the past, she was stuck in a debt trap, at the mercy of loan sharks who imposed steep interest rates. Today, for the first time, she controls her own finances—and has a plan for achieving economic independence. Her story is hardly extraordinary. It stands as a testament to DeFi’s transformative power—but only when it’s open, accessible, and built for all.

DeFi isn't inherently inclusive. It's just code. And just like any technology, code is not neutral – it reflects the biases and priorities of its creators. If we don't actively work to build a more equitable system, we risk replicating the same inequalities that plague traditional finance.

High Gas Fees Lock Out Many

So let’s be honest for a minute here. Using DeFi today is like attempting to enter an exclusive VIP club, but your wallet is smashed. This is the problem with high gas fees on Ethereum, for instance, which essentially leave out anyone who isn’t already rich. It's ironic, isn't it? A better system would actually democratize finance. It only truly opens up when it is made available to those who can afford the exorbitant pay wall. This isn't just about the cost of transactions; it's about the opportunity cost. If you’re only looking to move around small amounts, the fees render DeFi entirely uneconomic.

Think of it this way: you wouldn't charge a toll on a bridge that connects a low-income neighborhood to the rest of the city, would you? That’s exactly what we’re asking with exorbitant gas fees. We are forcing young people to incur unnecessary barriers to entry, which only furthers our nation’s financial inequality.

We need to sharpen our focus on Layer 2 solutions and cheaper chains. We need to democratize DeFi empire building, and not just enable the whales to take all of us to the cleaners. Projects like those building on BNB Chain and Avalanche are showing promise in this regard, demonstrating that scalability and affordability are achievable.

  • Layer 2 Solutions: Optimism, Arbitrum, Polygon
  • Alternative Chains: BNB Chain, Avalanche, Solana

What about Education and User Experience

Beyond gas fees, there's another significant barrier to entry: complexity. Let’s face it, the DeFi ecosystem is so new that it’s like trying to start a spaceship and fly it without a user guide. Words and phrases such as “impermanent loss”, “yield farming”, and “liquidity pools” can be very off-putting. This is particularly so for those who are new to the crypto space.

We need to simplify the user experience. And we need to design educational materials that are simple and user-friendly. This isn't just about making DeFi more user-friendly. It's about empowering people with the knowledge they need to make informed decisions about their finances.

Now, picture a world where using DeFi platforms feels as natural as leveraging an online banking application. Now picture educational materials that are customized to address the unique needs of each community. That’s the world we have to create.

DeFi protocols provide various functionalities such as lending, borrowing, yield farming, and decentralized trading through smart contracts. AMMs like Uniswap use liquidity pools to let users trade against a smart contract, rather than using an order book. Cryptocurrency users connect wallets such as MetaMask, Trust Wallet, or WalletConnect to trade on these DeFi platforms. Traders pay transaction fees for this service as liquidity providers. However, liquidity providers have to take on the risk of impermanent loss. Platforms such as netherex offer a comprehensive overview of DeFi portfolios, assist in monitoring yields, and optimize trading strategies.

Think about the early days of the internet. This made it clunky, complicated, and overall largely inaccessible to the average person. Yet, it quickly turned into the collaborative and intuitive platform we’ve all come to love. DeFi too is in its early, formative, reactive stages. We’ll have to invest in user experience and education to make sure it’s intuitive and accessible for everybody.

DeFi’s impact on the trading of crypto assets is sweeping, presenting decentralized, peer-to-peer options to legacy, centralized exchanges (CEXs). CEXs are limited by custodial control, regulatory obstacles, and single points of failure. Unchained and unregistered, just like DeFi. Unlike CEXs, almost all DeFi platforms do not require any registration or KYC process.

The future of DeFi isn’t just financial, it’s inclusive. We are committed to building a more inclusive financial system for all. It will be equitable and empowering, regardless of race or income level.

We must diversify who gets to build and govern DeFi protocols. User experience and education must be priority number one. Beyond making conversation, we have to work to overcome scalability and accessibility hurdles. We need to stop selling DeFi short and focus on its true promise. It holds the promise of making a deeper, more just and more equitable world! Let's not forget that promise. Together, let’s create a future where DeFi is open and accessible to all.

We need to diversify the voices involved in building and governing DeFi protocols. We need to prioritize user experience and education. We need to address the challenges of scalability and accessibility. And most importantly, we need to remember that the true potential of DeFi lies in its ability to create a more just and equitable world. Let's not forget that promise. Let's build a future where DeFi truly belongs to everyone.