One Million Fewer, One other Billion: How Does DeFi Obtain Mass Adoption?


A report by the Ethereum metrics website Dune Analytics on Friday showed that the decentralized financial ecosystem (DeFi) now has over 1 million unique Ethereum addresses as participants – a more than ten-fold increase from the 91,000 addresses on December 6, 2019.

While the growth was undeniable, some experts caution against interpreting the milestone as a sign of widespread acceptance. For DeFi to really break the mainstream, many advocates of the emerging industry may need to rethink their communication and contact strategies.

The Dune Analytics report, produced by aggregating the total number of addresses that have ever used popular DeFi protocols such as Uniswap, Compound, and Aave, found that "users" were interpreted as "unique addresses" in their calculations, which means that the millionth address mark in use may not be as bullish as it seems at first glance.


– Richard Chen (@ richardchen39) December 4, 2020

Many DeFi users typically provide multiple addresses to protect their privacy while transacting on Ethereum's public network. Merging "addresses" with "users" can lead analysts to dubious numbers.

Brian Flynn, co-founder of a startup that incentivizes participation in DeFi, Rabbithole, suggests that the actual number of participants is far fewer.

“The reality is that the number of unique users is only 10-15% of that. That's the real metric that matters, ”Flynn told Cointelegraph.

"Speculators to the participants"

How is DeFi really going to reach 1 million users and beyond? Flynn stated that the first step in attracting a greater number of unique users will be a "killer speculation-focused application," similar to the CeFi trading platform Robinhood, which saw a notable boom in participation during the Covid bans.

In the long run, however, finding ways to motivate users to participate in DeFi governance and infrastructure elements will be a 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 fraction has ever provided liquidity. For anyone who made assets available on Compound to earn interest, only a small portion borrowed to take out a loan. "

“We need users who are further down the rabbit hole, moving from speculators to participants in an open economy. This is how we drive real acceptance. "

To this end, Flynn announced that Rabbithole has planned "multiple" campaigns with leading DeFi platforms to encourage greater user engagement in protocols in exchange for governance tokens.

"This change won't happen overnight, but the most important thing we can do is get hands-on with 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 can attract different types of users overall.

Patrick Rawson, co-founder of the DAO engineering and blockchain experimentation outfit Curve Labs, says the current user experience in DeFi is tailored for a very specific demographic.

"The people who use these mechanisms, they distort men, they distort younger, they distort the desire to make a profit (…), they tend to be tech savvy," Rawson said. "This user profile will demand what makes the most profit."

If DeFi really wants to reach "the unbanked bank" and users "last mile," they may need to think about new outreach strategies, argues Rawson – one that will better enable users to achieve their desired results.

"Let's look at another user profile for a second. Older, sub-Saharan Africa, female, has a tech-savvy family. Does this user want profit at the expense of everything else? No – they probably care more for the environment around her, she cares that her family is healthy and healthy. (…) She wants a DeFi that benefits her local community, and not a DeFi that optimizes profits at any cost. "

According to Rawson, DeFi must adapt to "localized institutional structures that reflect local values" to achieve this shift. One example he offered is the Sarafu Loan, an experiment in Kenya that had previously worked with Bancor.

Flynn agrees that focusing on profits above all else could be a restrictive way of preaching the gospel of DeFi. The way current participants in the DeFi ecosystem discuss with friends and family will also play an important role in building it for the future:

"We need to stop focusing on price and more on how crypto networks and decentralization are a new way of building organizations."


Melinda Martin