There is no getting away from the fact that DeFi is becoming a very popular outlet for the growth of the cryptocurrency ecosystem. Many feel that DeFi could be a change changer in the world of finance driven by blockchain and cryptocurrency.
However, as DeFi has started putting its head up and gaining some notoriety it is also attracting some of the negative aspects of the cryptocurrency space. DeFi recently crossed the $1 billion mark, representing its huge interest, but the space also has felt a number of big hacks in the past few weeks and months.
However, the most recent of these hacks have not dealt too much damage as a variety of reasons have seen little damage done as a hacker even returned $25 million to one such hacked exchange.
However, what all these hacks have done, according to the president of crypto custodian Anchorage, Diogo Monica, exposes the shortfalls of the current custody of coins in cold storage.
Monica stated that the increasing complexity of DeFi “is beginning to expose the inadequacies of cold storage custody and manual human operations.”
A need for more
If DeFi is to become a popular use of the blockchain and cryptocurrency space, it needs to quickly increase its protection of funds or face people deserting the space before it reaches its potential. Monica explains:
“We see in our support for MKR governance, executive voting, and polling that clients want and often need to participate in on-chain activities.As new and emerging protocols increasingly require this kind of active use of private keys, some custodians are having to put more trust in untested smart contracts, which can put client assets at risk.”
What is more important to note is that the desire for DeFi is not only nascent and cautionary, there is also evidence that institutional interest in the DeFi space is growing as these traditional financial institutions look to new technologies to improve their offerings.
“Our institutional clients want to invest in a range of digital assets, including new DeFi projects and stablecoins. Anchorage’s mission is to increase institutional participation in the crypto space, and DeFi is where a lot of the most exciting innovations are happening right now,” he said.