DeFi To Achieve Mass Adoption Through Institutional Participation, Says DEX Founder

While the prices of decentralized financial (DeFi) tokens may fall, new forms of utility such as liquid staking are emerging and some believe more people could be drawn to DeFi as more institutions jump into the fray.

According to Eric Chen, CEO and co-founder of Injective Labs, there are still issues to solve such as gas tariffs, scalability and liquidity, while the DeFi industry has seen tremendous growth since 2020. Chen said the entire DeFi industry is focused on building infrastructures to address these issues.

“It still has a lot of problems to solve before it can serve billions of users. Scalability, mining value and gas costs will become increasingly important to improve over time.”

The DEX founder also believes that the industry’s growth can be attributed to the development of new primitives and user growth. Moreover, Chen also told Coin-Crypto that adoption could be driven by the participation of traditional financial entities. “With many traditional institutions joining the space, DeFi will gradually gain mass acceptance,” Chen said.

Permissioned DeFi, a form of DeFi that combines decentralization with centralized mechanisms such as whitelisting for KYC and AML purposes, could give institutions a push to adopt DeFi. Chen explained that:

“Permissioned DeFi certainly makes it much more comfortable for traditional institutions to participate in the ecosystem. It will play an important role in advancing global mainstream adoption.”

Earlier in 2022, liquidity protocol Aave launched a permitted DeFi pool. The pool gives institutions access to decentralized finance functions while complying with existing regulations.

Eric Chen, CEO and co-founder of Injective Labs. Source: Injective Labs

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When asked about DeFi regulation, Chen said DeFi is easier to regulate than legacy infrastructures. The DEX founder emphasized that DeFi’s mission is to “provide decentralized, secure and transparent financial services”. Therefore, Chen believes good research will provide regulators with an easy way to regulate DeFi.

“With proper research and understanding, regulators will find a much easier time regulating DeFi and preventing malicious behavior compared to the legacy financial infrastructure.”

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