Opinion by: Jean Rausis, Co-Founder of Smardex
Decentralized Finance (DEFI) began with a clear vision: to enable a global, unauthorized financial system developed in peer-to-peer transactions (P2P), free from obstacles of traditional finance (Tradfi).
Early decentralized lending platforms embrace that vision by connecting lenders and lending directly, allowing them to organize in their terms without the durability of the tradfi.
Unfortunately, over time, most of these defi protocols have moved away from this ethos, which has abandoned real P2P contacts instead of relying on pools of liquidity, external price oracles and heavy automatic market makers (AMMs).
These structures are locked in liquidity, but at the expense of user control, transparency and exposure to the so-called “oracle” that can be obedient in the middle. Users are now boxing in the preexisting liquid pool, often with little to say which collateral assets they can use or what risk profiles they want to make.
Worse, even the so -called DEFI leaders do not follow the most basic principles of decentralization. The Recent hyperliquid exchange exploitation It is made clear when the platform destroys a major taboo by manipulating its oracle value. With the downfall of exploitation, the total amount locked (TVL) fell from $ 540 million to $ 150 million.
Defi seems to have lost clearly. To move forward, it really needs to go back to where it all started.
The promise of P2P
When Defi first caught the main attention of the mainstream, P2P lending was its bedrock. Instead of parking ownership in a bank or centralized exchange (CEX), people can lend directly to one another and agree with terms such as collateral type and interest rate, all are implemented by wise contracts. It is a success in transparency and distrust, but as the demand for liquidity grows, its developers move to the pooled systems.
The pool pools aimed at losing the lending process and improving the efficiency of capital, and they did. Lenders get immediate access to funds, and lenders can earn passive produce without waiting to be matched.
While the pools are undoubtedly groundbreaking, they still lack one of the most significant potential sale of defi points: the promise of a truly independent P2P system. Due to a pooled system, people can no longer set their own terms – they are, again, forced by a strict system.
Defi was lost from the P2P ideas where it was built. As the newer defi protocols forgot their origins, they have also abandoned the many golden rules of decentralization that are risk of becoming incomprehensible from centralized systems that they claim to overthrow.
Decentralization illusion
The Hyperliquid incident is a case to the point of how fragile the illusion of decentralization. While the exchange is claimed to be relying on an independent oracle, it maintains the authority to avoid pricing Oracle and used this power without excessive doubt.
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This forced intervention may prevent further losses, but it destroys any confidence in the decentralization of the exchange. A decentralized platform that retroactively rewritten the rules and dictated prices could not be considered truly decentralized.
Oracles at Defi should be sacred, unauthorized and secured by a decentralized network of validators-not a tool for a pseudo-defi team to manipulate the market whenever things become tough.
Incidents like these only strengthen public skepticism and make it harder for the believable builders to gain confidence. Until Defi begins to live to its name, it will continue to fall into ethos that it is allegedly representing.
The adoption of the mass is demanded by a centric user shift
This is why Defi needs to return to its roots. The borrowing and lending of P2P, which is reimagined for a more modern and sophisticated system, offers a path ahead. A model in which individuals talk to fixed terms, choose their collateral, and eliminate the hope of fragile, central controlled oracle pricing is clearer and more resilient.
In this system, people can set their own policies, directly interact with one another with a truly unauthorized, decentralized environment, and choose their own collateral. Whether choosing property, lending and borrowing directly, or simply transacting without intermediary, each DEFI user should be accessible to an open, safe, user-driven system. This is the only way to achieve mass adoption, by restoring control and transparency defi is built to be delivered.
Such a model will appeal to crypto-native users and newcomers. And the good news is that the demand for Defi has not lost anywhere despite the rocky market. Recently, Aave, one of Defi’s stalwarts, announced that its TVL has reached a full time $ 40 billionWhile Uniswap became the first decentralized exchange (Dex) to Press $ 3 trillion at all time trading volume.
These are not signs of a fading trend – these are proof of a sector that aggregates under pressure. To convert that interest to long -term adoption that adheres to the world, the DeFI requires a better product choice. The future is not more complicated – simplicity, flexibility and personality – exactly what P2P is always intentional.
Opinion by: Jean Rausis, Co-Founder of Smardex.
This article is for general information purposes and is not intended to be and should not be done as legal or investment advice. The views, attitudes, and opinions expressed here are unique and do not necessarily reflect or represent the views and opinions of the cointelegraph.
