A wide variety of solutions are already being developed to address these issues, and in time, growing volumes, better code and new forms of interoperability like Atomic Swaps and pTokens should make DeFi increasingly attractive to the current financial world and regular citizens alike.
All of the listed risks and problems are being worked on in a variety of ways within the community, and some may simply be solved with time. Problems with smart contracts as well as user errors may become less frequent with a more thoughtful use of audits, bug bounties, open-source commitments and a collaborative and supportive approach to building new solutions. As governments begin to cement regulations over these assets, it should provide a clearer framework for investors to stay within predictable legal parameters.
Perhaps most important, solutions that improve and facilitate liquidity are vital; a liquid market will support a fast-growing user base, providing frictionless and enjoyable ways for players to transfer value across different blockchains and their DApps.
To that end, multiple new technologies are being developed with just those goals in mind. For example, in order to improve the capacity of the Ethereum network, the developers are planning to introduce Ethereum version 2 in the near future. By introducing this upgraded infrastructure, significant gains can be made not only in the speed of transactions, but also capacity.
Another promising idea being explored is known as Atomic Swaps. These can take a variety of forms for implementation, but basically involve transferring value directly from one blockchain to another. This is achieved using time-bound smart contracts that must be executed between both chains. While this concept has seen some interest, the process is highly technical and has seen limited adoption. Most recently a form of this was implemented by Blockstream’s Liquid sidechain, but for the most part, the technology is still in the experimental stage.
Furthermore, the rise of decentralized liquidity pools can help bring in the much-needed flexibility that will give more traders confidence in these assets.