Kyle Samani, a seasoned investor and analyst, named a couple of key challenges to the progress of decentralized finances: high gas fees and operations latency.
Two Main Obstacles for DeFi
Mr. Samani indicated two significant problems within the decentralized finances sphere. One involves high gas fees. Kyle Samani explained it with the popularity of Ponzi schemes that overload network. It may also be interpreted as 'growing pains' for the high-speed and ever-expanding DeFi sphere.
0/ Some thoughts on the upcoming evolution of liquidity in the DEX market— Kyle Samani (@KyleSamani) May 22, 2020
TLDR - the DEX space is going to look and feel a lot more like the CEX space (deposit, trade, withdraw), but it will retain DEX's native non custodial and censorship resistance
The other problem is latency. With high latency, unfair arbitrage deals will occur here, and malefactors will be able to easily predict the price spreads on such exchanges.
The second effect caused the end of FutureSwap's alpha demo. The Synthetix platform was also affected by latency problems.
It is a common belief in some parts of the crypto community that second-layer solutions may solve both issues due to decreased latency and gas fees.
Layer Two: Too Little Too Late
Mr. Samani is sure that all of the 'layer-two' solutions (scalability systems built on top of the blockchains) have their own trade-offs that makes them impractical in terms of DeFi optimization.
Ethereum (ETH) 2.0 revealed a similar story as the sharding design won't help DeFi get rid of such obstacles.
However, Kyle Samani is optimistic about the general progress of decentralized finances. It will work like popular centralized services in terms of deposits, withdrawals, and trades.
However, the non-custodial manner and censorship resistance (corporate style of DeFi) will stay unchanged with the progress of this sector.