Stani Kulechov, the founder of the decentralized finance (DeFi) protocol Aave, highlighted several issues within the DeFi space at the StarkWare Sessions 2023, held at The Cameri Theatre in Tel Aviv, Israel.
In a fireside chat titled “DeFi: Resilience in the Face of Global Uncertainty,” Kulechov and Cointelegraph’s managing editor Alex Cohen discussed various topics, including DeFi’s risks compared to traditional finance (TradFi) and how stablecoins can lead to more DeFi adoption.
According to Kulechov, the preciseness of quantifying risks in DeFi is better compared to TradFi products, and this could push further adoption for the space. The Aave founder explained that this means that operating in DeFi would actually become cheaper than TradFi as the risks are identified easier. He said:
“You have all this visibility, you can actually quantify the risk more precisely which should mean that then you’re operating in an environment where it should be cheaper for you because the risks are more known.”
When asked about onboarding regular people who may not be as “tech-savvy” into the DeFi space, Kulechov noted that stablecoins and payments could play an important role. According to the Aave executive, building the “payment layer,” which involves stablecoins, can potentially hook regular people into the space, eventually introducing them into DeFi.
“It’s more about building that payment layer, and then the whole DeFi loop starts to close because you have a way to exchange value easily,” he said. In addition, Kulechov also said that pushing the innovation curve further can break more adoption.
Despite these, the Aave executive also recognized that there are several issues within the stablecoins space. This involves the value within the ecosystem and backing in decentralized stablecoins. Kulechov explained that:
“The current issue is that there is not enough value in the ecosystem that you just have less backing in decentralized stablecoins compared with centralized. And, I think that’s where we have kind of like a big problem at the moment.”
The Aave founder further added that the stablecoins which he described as the “most resilient ones” are those that are overcollateralized.
When asked about DeFi becoming more of a buzzword in the near future, the Aave protocol founder expressed confidence in the space being around for a long time. He said:
“DeFi will be around for quite a long time because it solves one of the first problems that blockchain has been solving. And, it’s an infrastructure that’s going to be used in many applications.”
The founder highlighted that there are many new innovations in the space, even finding their way into even non-financial applications.