A report on Friday from Ethereum metrics website Dune Analytics showed that the Decentralized Finance (DeFi) ecosystem now counts more than 1 million unique Ethereum addresses as participants – a more than tenfold increase from the 91,000 addresses on December 6, 2019.
But while the growth was undeniable, some experts caution not to interpret the milestone as a sign of widespread adoption. In order for DeFi to really break the mainstream, many advocates of the emerging vertical must rethink their communication and outreach strategies.
The Dune Analytics report, compiled by gathering the total number of addresses that have ever used popular DeFi protocols like Uniswap, Compound, and Aave, noted that their calculations interpret “ users ” as “ unique addresses, ” meaning the millionth address marker may not be as optimistic as it seems at first glance.
– Richard Chen (@ richardchen39) December 4, 2020
Many DeFi users often use multiple addresses to protect their privacy during transactions on Ethereum’s public network, and merging “addresses” with “users” can lead analysts to questionable numbers.
Brian Flynn, the co-founder of a startup driving participation in DeFi, Rabbithole, suggests the actual number of participants is much lower.
“The reality is that the number of unique users is only 10-15%. That’s the real measure that matters, ”Flynn told Cointelegraph.
‘Speculators for participants’
So how does DeFi really reach a million users and more? Flynn explained that the first step in attracting a greater number of unique users will be a ‘killer application focused on speculation’, similar to CeFi trading platform Robinhood, which enjoyed a remarkable increase in participation during Covid’s lockdowns.
In the long run, however, finding ways to incentivize users to participate in DeFi governance and infrastructure layer elements will lead to sustainable success.
“Many users understand how to trade tokens on Uniswap or an aggregator, but don’t understand how these protocols work under the hood,” he said. “For example, of all the addresses that have traded on Uniswap, only a small portion has ever provided liquidity. For anyone who has delivered assets on Compound to earn interest, only a small portion has been borrowed to take out a loan. “
“We need users to go further down the rabbit hole and from speculators to participants in an open economy. That’s how we drive real adoption. “
To that end, Flynn revealed that Rabbithole has planned “several” campaigns with leading DeFi platforms to encourage richer protocol participation from users in exchange for governance tokens.
“This change won’t happen overnight, but the most important thing we can do is teach with real hands-on participation in these networks,” he added.
‘Another user profile’
Encouraging users to become more active actors in the DeFi landscape is a promising step towards adoption, but another one might attract different types of users.
Patrick Rawson, co-founder of DAO engineering and blockchain experiment outfit Curve Labs, says the current user experience in DeFi is tailored to a very specific demographic.
“The people who use these mechanisms, they skew men, they skew younger, they skew because they want to make a profit […], they tend to be tech savvy, ”said Rawson. “This user profile will demand anything that will make them most profitable.”
If DeFi really wants to “bank the banks without a bank” and reach “the last mile” of users, they may need to consider new outreach strategies, Rawson argues – one that empowers users to better search for their desired results.
“Let’s take a look at a different user profile. Older, is from sub-Saharan Africa, female, has a family, not tech-savvy. Will this user want a profit at the expense of everything else? No – she is probably more interested in the environment around her, she is interested in the health and wellbeing of her family. […] She wants a DeFi that benefits her local community, rather than a DeFi that optimizes profits at all costs. ”
Rawson says that to bring about this shift, DeFi will have to adapt to “localized institutional structures that reflect local values.” An example he offered is the Sarafu credit, a ‘community currency’ experiment in Kenya that previously collaborated with Bancor.
Flynn agrees that focusing on profit above all else can be a limiting way to preach the gospel of DeFi. The way current participants in the ecosystem discuss DeFi with friends and family will also play an important role in building the future:
“We should no longer focus on price, and more on how crypto networks and decentralization are a new way to build organizations.”