Disclosure: The views and opinions expressed herein belong solely to the author and do not represent the views and opinions of crypto.news editorial.
There is a false – and, I would argue, dangerous – belief that in DeFi, strong UX cannot be achieved without some degree of centralization. We understand why some people believe this; Centralized platforms like Coinbase and Binance are known for their interfaces that are intuitive and accessible to everyday users. Yet centralized systems often fail in areas such as transparency and security.
It’s tempting for DeFi projects, who have already heard time and time again that UX is the missing piece for Web3 adoption, to prioritize accessibility over transparency and security in the aim to attract users. But these lower safety standards will likely come back to bite them one day.
Whether true or exaggerated, the message that UX is the final piece of web3 success is pushing too many DeFi developers into thinking they must sacrifice decentralization, which would go against the very nature of DeFi and reason for being.
This view is erroneous. Decentralization cannot – and should not be – sacrificed for a smoother user experience. DeFi can – and should – have both.
A reminder of what happens when we sacrifice decentralization
Centralized entities in crypto have repeatedly shown their limits. Scandals such as the collapse of Three Arrows Capital (3AC) and Celsius have demonstrated how centralized entities fail to provide the reliability and transparency users expect, and can have disastrous consequences. As we saw with the fall of FTX, centralization allowed for greater opacity, which hid reckless decision-making from the public and sent shockwaves through the industry when billions in assets were lost. users have disappeared. FTX users were blind to the risks until it was too late.
This is not the case for decentralized protocols, whose transparency holds them accountable. All transactions are visible on-chain, providing users with insights and assurances that do not exist with their centralized counterparts. DeFi protocols such as Aave, operational for almost a decade (since 2017), show the viability of decentralized solutions.
This does not mean that decentralized systems are foolproof: events like the collapse of Terra in 2022 have shown that decentralization does not guarantee success. But at least when decentralized protocols fail, they fail in terms of transparency. Users have a degree of visibility and the ability to hold these systems accountable when something goes wrong.
Decentralization is not incompatible with UX
Given the importance of decentralization in DeFi, it is clear that it cannot be sacrificed for the sake of better UX. This is not necessarily the case either.
We already have proof of this. Smart contract improvements, Layer 2 solutions, and intuitive wallet designs are transforming DeFi UX without requiring projects to sacrifice decentralization, as we saw with Uniswap and Unichain L2 wallet.
The obvious challenge to achieving strong UX in DeFi is the young age of the sector. Centralized applications, which are often Web2 frameworks with encryption capabilities layered on top of each other, naturally provide a smoother experience today because developers have decades of Web2 UX experience to draw on. This is not the case for decentralized frameworks, which present unique challenges when it comes to scalability, fragmentation, and compliance. These challenges are being actively addressed and resolved.
How do we measure DeFi?
How we determine good or bad UX is also an important consideration, especially when so many people criticize DeFi for its complexity. But isn’t that the case for TradFi?
Managing multiple accounts on different exchanges or trying to move assets from one brokerage to another are not smooth experiences. DeFi aims to simplify these processes through greater interoperability while introducing the added benefits of transparency, trustlessness, and user control. Its UX may not yet be up to par with web2 interfaces, but it’s getting close. As tools and protocols continue to evolve, so will the user experience.
It can’t be this or that. We need both
The future of finance should not involve choosing between centralized convenience and decentralized security. We must demand both, especially as we recognize the failures of centralized entities and the need for greater transparency.
The UX gap in DeFi is narrowing. Even if it isn’t closed tomorrow or the day after, there will come a day when users will no longer have to choose between an easy-to-use platform and security. They will have both, and that is why we must focus our efforts on building that future.