✖️Problem

Many projects claim to prioritize decentralization, but the question remains: are they truly decentralized?

Fundamental

• Centralized exchanges are not required to disclose their solvency status, making it difficult for users to differentiate between customer funds and company funds. Although centralized exchanges have provided transparency reports on customers' holdings, it remains unclear how these funds are organized.

• In web3, governance is often touted as a vital component. However, when it comes down to it, everything can still be controlled by the founders. For some, a DAO is simply a term used to avoid regulatory scrutiny and responsibility. It is still unclear to this date how a DAO can operate in the long term.

• DeFi protocols are built on top of blockchains, which are inherently secure. However, there have been a number of hacks and exploits in the DeFi space. It is important to do your research and only invest in DeFi protocols that have been audited by a reputable security firm.

• Bootstrapping liquidity for both traditional tokenized asset classes and crypto assets is often the most difficult problem to solve. Spot markets are available through Uniswap and many others, but there are no perpetual markets that founders and liquidity providers can freely list.

Traders

• Default risk has become a growing concern for most centralized exchanges. Despite the exchanges' production of transparency reports on customers' holdings, it remains unclear whether a $500m budget for putting names on sports facilities is justifiable.

• One of the biggest challenges with DeFi is liquidity. Because DeFi protocols are still relatively new, there is not always a lot of liquidity available. This can make it difficult to buy and sell tokens at a fair price.

LPs

• Many tokens are freely airdropped for incentive purposes without real utility or underlying assets supporting them.

• Additionally, there are no risk management tools for LPs. Most DEXs do not stop users from depositing tokens when the token weight exceeds the target weight, instead opting for soft guidance. As a result, funds can be drained if there are consecutive winnings from traders.

• While yield farming on existing DeFi protocols is available, it may not be attractive enough for some. Traditional finance yields are expected to remain high for a long period of time, but some savvy investors who understand the code, tokenomics, and business model are searching for higher alpha.