Opinion by: Doug Colkitt, a founding contributor to Fogo
To join its philosophy of decentralization above all, the cryptography industry often forgets its main user: the merchant. What exists today is an ecosystem that has prioritized philosophical principles instead of practical use cases – something that has simultaneously prohibited to the most serious traders to participate and lead decentralized finance users (DEFI) to more centralized offers.
If Defi is defined on a scale beyond speculation alone – and offers a significant alternative to Tradfi – then the main objective must be performance.
Enter a viable minimum decentralization (MVD). MVD could offer a pragmatic plan to preserve resistance to censorship without sacrificing speed, reliability and conviviality on which the real markets rely. Here’s how MVD evolves in real time.
Tradfi is right where deffi goes wrong
The 1990s marked a historical change for Tradfi. Since the dawn of the future in the 19th century as a new way of covering the prices of wheat and corn, these markets have become one of the most liquid financial ecosystems of all time.
The end of the 20th century marked a leap forward with the decline of manual ineffectiveness. Thanks to electronic trading platforms, high frequency trading (HFT) has stormed the world. Tradfi has laid the basics of technical infrastructure designed to serve its main users – merchants – emphasizing speed, reliability and execution. Tradfi has evolved worldwide and has won institutional confidence by giving traders what they need to prosper.
On the other hand, DEFI was born due to the ideology: he underlines decentralization at all costs, access without authorization and resistance to censorship. In doing so, these are inherited performance limitations such as light block blocks, an unpredictable inclusion of transactions and a fragile purpose.
For example, block times of 12 to 15 seconds of Ethereum make it unusable for HFT, forcing successful projects like Dydx to migrate entirely from the chain. In addition to this, the maximum extractable value (MEV) allows validators to make transactions at the front or sandwich, compromising the confidence of users and the quality of execution.
These defects are more than technical hiccups, which is why defectations of DEFI can degrade the integrity of prices, create a shift and prevent serious traders from participating. From now on, even the most popular DEFI protocols have trouble keeping power users and stimulating a large volume, proving that, although the ideology is inspiring, the infrastructure is what is evolving.
Traders need infrastructure that operates
Even if Defi has been created to improve the problems associated with centralized platforms (intermediaries, long periods of settlement and lack of transparency), traders – in particular high frequency and institutional traders – care about performance above all. In other words, they want the execution measured in milliseconds (not a few seconds), availability during volatility and trades that were quickly adjusted, predictable and fair.
If Defi wants to compete with Tradfi, the decentralized infrastructure must meet new technical standards, such as preparing for HFT. This includes block times of less than 100 ms, an end of a second, high -speed control books, inclusion latency less than 50 ms, devoted MEV protection and availability of 99.999%.
In relation: Our current data infrastructure threatens the future of deff
Today, these qualifications may look like a luxury, but sincerely, they are table issues to the best traders in the world. Therefore, if Defi wants to become the new global standard for finance, he will have to start prioritizing what traders care the most.
Resistance to speed and censorship may coexist
One of the biggest web3 problems is that he often treats decentralization as a binary. Most manufacturers think that it must be maximized at all costs, otherwise they have sold. The most efficient systems consider compromise and do not adhere to the principles of purity alone. This is where the minimum viable decentralization thesis (MVD) comes into play.
It argues that protocols can maintain just enough to preserve what distinguishes separate deffi without sacrificing performance. Resistance to censorship and access without authorization are important at the end of the day. Maintaining these ideals while creating infrastructure that can serve real markets is possible. With MVD, manufacturers can consider the least decentralization possible while ensuring execution without confidence. From there, they can optimize what matters most to make trading really viable, such as latency, purpose and flow.
New channels are paving the way in this change by balancing user sovereignty with lean validators, consensus with rapid purpose and parallelized execution. This is only a starting point: MVD is still in its infancy, and several manufacturers have the unique opportunity to create an infrastructure which is simultaneously open, fair and usable.
MVD increases the standard of the next chapter of DEFI
For DEFI to exceed its experimentation phase, he must fully kiss MVD. The speed demand is visible: institutions buy more digital assets daily, and retail investors are experiencing more and more.
Today, Defi is evolving quickly and derivatives are its fastest growth sector. Decentralized perpetual markets are expected to treat more than $ 351 billions by 2031 (increasing more than 138% in annual sliding), competing with the Tradfi scale. With an early momentum of platforms like Hyperliquid and Aevo, it becomes even clearer than Defi has real legs. At the same time, these protocols are still limited by the dependencies of layer 1, the bearing latency and unpredictable settlement times.
MVD will have to play an even more important role. Today, Defi cannot count on purity alone. He must rely on performance, speed and just enough decentralization to gain the confidence of its users.
Opinion of: Doug Colkitt, founding contributor to Fogo.
This article is for general information purposes and is not intended to be and must not be considered as legal or investment advice. The points of view, the thoughts and opinions expressed here are the only of the author and do not reflect or do not necessarily represent the opinions and opinions of Cointellegraph.
