Problems with DeFi Today

Despite self-custody safety, distributed settlement infrastructure, superior composability and better yields - there are 3 core issues that are limiting DeFi from competing and eventually overtaking CeFi.

Margin Fragmentation: In CeFi, users can margin across positions in many different products which maximizes capital efficiency that enables many profitable strategies that drive increased liquidity. With the fragmented nature of dApps and silos of capital, these strategies are not possible in DeFi. Even a simple basis trade is difficult to execute on Perp DEXs. FTX was the first to launch robust cross-margining in crypto, which was a large driver of their growth to a top 3 CEX - now this is a common feature for every CEX.

UI / UX fragmentation: The DeFi UX is fragmented across many different front-ends, often requiring multiple steps to complete a desired transaction. There is no singular front-end environment to view a user’s positions and execute transactions like CEXs have - which severely limits mass adoption.

Performance / Throughput: Current L2 throughput is limited relative to off-chain systems, which is especially relevant for HFT liquidity providers interacting with order book matching engines. Limited performance capabilities make it difficult for these market participants to run their desired strategies, severly limiting market liquidity on-chain.