In just a few years DeFi has evolved into a parallel financial universe, handling billions of dollars of value. However, DeFi still has a limited user reach with its products primarily used by the same group of people.
There are several reasons for that.
For one, the products have been difficult to use. Not just the apps themselves, but the tools needed to engage with them in the first place. Downloading a non-custodial browser wallet, storing a seed phrase in a secure manner, paying gas fees to initiate transactions, are all foreign concepts to mainstream users.
Consequently, a lot of the DeFi products were built with a small group of sophisticated early adopters in mind that didn’t care about the clunky UX. Innovation became centred around those users, resulting in increasingly complex products with a limited addressable market.
It now feels like we’re at the verge of DeFi breaking out with products that can address a wider audience.
One of the main reasons is that a lot of the underlying infrastructure is maturing. Advances in layer 2 scaling technologies, embedded wallet solutions, gas abstractions and other piece of infrastructure have given founders the tools to build experiences that leverage the benefits of crypto while hiding the complexity.
Several core DeFi building blocks are also maturing that can be woven together to create mainstream financial applications. Below are some that I’m most excited about.
Stablecoins
Stablecoins are the gateway drug to DeFi. Transacting in stablecoins is a faster and cheaper way of transferring value. Stablecoins are also composable with the rest of DeFi, which means they can seamlessly be used across a myriad of DeFi applications, some of which I’ll mention below. Apps can be built on stablecoins to leverage the benefits of DeFi, while making the experience as familiar as possible to users. For example, user deposits can be displayed in USD, while under the hood users hold USDC.
Yield-generating stablecoins
Yield generating stablecoins allow users to hold a stable asset that is automatically generating yield. sDAI, for example, is the yield generating version of the dollar-denominated stablecoin DAI, which generates yield from assets like treasury bills and passes that yield onto sDAI holders.
One can imagine a consumer savings app built on sDAI. Users deposit their dollars into the app, which under the hood is automatically used to purchase DAI and then wrapped into sDAI through the Spark Protocol.
If users want to move their DAI deposits elsewhere, the app can simply unwrap sDAI back into DAI.
Streaming payments
DeFi has introduced an entirely new way of making payments by introducing streaming. Products like Sablier and Superfluid allow users to continuously stream a pre-defined amount of value over a certain period of time. Monthly salaries can be streamed by companies to their employees in USDC every second instead of needing to wait to the end of the month to make a lump sum payment.
Other yield opportunities
DeFi has many yield opportunities that stablecoin holders can access with ease. Some examples include lending stablecoins on platforms like Maple and Morpho or purchasing tokenised treasury bills on Backed or Ondo.
Creating a consumer financial application that leverages DeFi in the background while presenting users with a "Revolut-like" interface is how to bring DeFi to everyone. It's DeFi's next step, and it feels like the time is here.