The CEO of Aave Stani Kulechov believes that DeFi is struggling because the sector lacks adequate innovations and the yield farming craze will be over soon. According to him, DeFi protocols are dangerously mimicking one another, but fortunately, the fundamentals remain strong.
Aave CEO on Decentralization
When it comes to the Decentralized Finance economy, average users lose out to wealthy investors. The reason most times is the high Ethereum transaction fees.
According to the Aave CEO Stani Kulechov, this imbalance can be changed by establishing democratic incentives that favor retail investors instead of copying existing models. From his statements, Aave points out that decentralization is the key to solving the problems in DeFi.
However, the CEO also stated that a DeFi protocol could only be fully decentralized when the early investors and its team members are not holding more than 50% of its tokens. He also stated that if the users can vote against the founding team’s proposal, then the protocol is truly decentralized.
Yield Farming Hype is Getting Old
While discussing DeFi with some reporters, Kulechov stated that DeFi became popular with its promise of incentives. With a mechanism like a yield farming, the sector grew very fast. But while the yield farming reward system is excellent, many protocols exploit users by offering unsustainable yields.
This is why Kulechov opines that the craziness will die soon and yield farming incentives will return to normal ground. But he also mentioned that the main problem of yield farming is the inability of DeFi protocols to innovate.
According to the CEO, these projects are copying the practices of popular DeFi protocols instead of providing better ways of distributing token governance. Kulechov believes that if the DeFi projects carry the communities along token distributions, they can eliminate many of the problems.
However, Kulechov mentioned that his project Aave continues to innovate. Aave released another model for its government. The v2 model allows the whole community to delegate voting power. The project is also considering a Layer 2 solution, and the CEO mentioned that they’d soon achieve it.
Aave CEO Highlights DeFi Problems
Since its inception, DeFi has been passing on the message as a decentralized system. Unfortunately, many project teams are making a mockery of it all. Many of the teams are centralized when it comes to controlling their token supply. This was further reported by St. Lois recently.
Due to the unregulated environment in which DeFi projects operate, it’s easier for many teams to launch copy-pasted projects.
This is why many projects have no value to contribute to the ecosystem. But according to the Aave CEO and the report from St Louis Fed, the DeFi space is yet to reach its full potential.
In the end, Kulechov revealed that he is following Pods Finance and Aavegotchi. Pod Finance is a project that aims at lowering the costs associated with using Aave’s aTokens as collateral. Aavegotchi, on the other hand, is a hybrid project of DeFi and NFT, which the company launched on the 2nd of March.