The goal of decentralized finance is to transform the world of money in such a way that everyone, no matter their status and regardless of where they live, can take full control of their financial sovereignty and access opportunities to build wealth.
It’s a laudable goal, but if DeFi is to achieve its mission, it’s going to need to overcome the inherent complexity that plagues every protocol. DeFi’s complex onboarding process is a major hurdle, deterring millions of potential users from making the leap to its brave new financial world.
One of the most pressing challenges for DeFi is the subpar user experience. Most DeFi applications are characterized by a complicated user interface that does a great job of making things look overly complex. As a result, they make their services seem inaccessible to many users.
Unlike traditional finance, where the bank strives to keep things simple, DeFi users have a whole bunch of responsibilities. The onus is on them to keep their funds safe and secure, and that requires people to set up crypto wallets, manage their security keys, interact with smart contracts, authenticate transactions, and more. Unfortunately, these necessities quickly pile up to create a steep learning curve.
Only once these steps have been completed can users then progress to the stage of actually trying to work out how to interact with DeFi protocols, but then they have to get their heads around concepts such as liquidity pools, staking, trading, and yield farming.
Another key stumbling block for DeFi is the need to pay gas fees. To use most digital assets in DeFi, you need more than the actual token you’re trying to lend, borrow, or stake. In addition, you’ll need the actual network’s native token – ETH on Ethereum, or SOL on Solana – to pay for those pesky gas fees. What’s more, these gas fees can be extremely volatile and often excessive. It’s not uncommon for users to pay gas fees of more than $20 on Ethereum, for example.
How Confusing Is It Really?
To get a picture of how complex this is for someone that’s just starting out, picture this. You’re a total newcomer to the space, and while you’ve managed to figure out how to buy some BTC and even some ETH, that’s just the start.
The next step is to download and set up a wallet, ideally a non-custodial one (what?), and make sure you keep the private key somewhere safe. Let’s say you do this, you find a DeFi protocol that’s interesting, and you have $1,000 worth of funds. For most people, that’s not a small sum, but imagine if the gas fees for a single transaction cost more than $20. Whatever small amount of interest you’re likely to earn will easily be consumed by those transaction costs.
The “simple” solution is to move to a lower-cost chain such as Avalanche. That necessitates bridging your funds to the new chain, setting up a custom RPC for Avalanche on your wallet, and then swapping some ETH for AVAX to pay for the gas fees on the new chain. To do that, you’ll need to find a suitable DEX platform to buy AVAX, pay fees on that transaction, and then finally swap into the actual assets you want to invest.
While this might be second nature for experienced DeFi hands, very few newcomers are going to be able to perform all of those steps without giving up. In fact, many will flee before they even begin. So long as DeFi remains like this, it’s never going to attract a mainstream audience.
Integrated On-Ramps Make Onboarding Easy
Fortunately, there are numerous projects working to solve these challenges and make life as easy as possible for new DeFi users. They’re on a quest to simplify the DeFi experience to the point where it’s as easy to interact with as TradFi is. It makes sense, given that most people have little trouble using banking apps these days.
One protocol that’s making a laudable effort to boost its mainstream appeal is Loopring, which has created a popular DeFi platform that emphasizes speed, security, and cost-effectiveness. It features an integrated Layer-2 network built atop Ethereum to support the rapid trading of ERC-20 tokens and Ethereum-based NFTs. But despite all of these features, it struggled for a long time to increase its user base beyond hardcore crypto natives.
Loopring’s biggest challenge was its need to onboard new users via the Ethereum mainnet, which proved itself to be a deal-killer for many newcomers to DeFi. Once new users understand that they need to purchase ETH from an exchange first, set up a wallet, and then transfer those tokens to Loopring, they simply give up, considering it to be far too complex.
Loopring turned to one of the crypto industry’s biggest on-ramp service providers, known as Ramp Network, to enable its users to purchase the tokens they need to start using its protocol right there within the dApp, so that they don’t have to go anywhere else.
The advantage of Ramp Network is that its API enables developers to integrate its simple swap interface directly within any dApp. Working with Ramp Network, Loopring was able to quickly add support for fiat to crypto transfers for essential DeFi assets like ETH, USDC, and its own native token, LRC. In doing this, it ensured that new users could do everything within the dApp, with no need to go elsewhere. What’s more, the experience is as easy as it gets, thanks to Ramp Network’s simple UI and its support for numerous payment methods like bank transfers, credit and debit cards, PIX, Google Pay, Apple Pay, and others. Even the KYC process in Ramp Network is super simple, and it only ever needs to be done once.
Loopring’s VP of Product and Operation Magic Pan said Ramp Network significantly lowered the barrier to entry to its protocol. Ramp Network now delivers the highest on-ramp volume to Loopring, and it has facilitate more than 20,000 transactions for Loopring users to date, with an average transaction size of just over $300, illustrating how it has made users confident enough to make substantial investments in the protocol.
Simpler User Interfaces Unlock DeFi Applications
The good news is that Loopring is far from alone in its efforts to simplify DeFi onboarding. A good example is DODO, which has created a novel DeFi app that’s aimed specifically at beginners, helping them to learn how to navigate all of the possibilities in decentralized finance.
Not only does it sport a clean and simple UI, but it also supports essential functions such as in-dApp token swaps, so users can quickly and easily swap any token for the one they want. It also enables users to engage in DeFi activities such as liquidity provision with minimal clicks involved, and of course, it supports simple cross-chain swaps where all of the complexity is performed under the hood, abstracted away from the user
A similar simple experience is offered by Divi Project, an Ethereum-based yield generation protocol that also has ambitions of becoming a one-stop DeFi shop for beginners, with integrated token swaps, NFTs, cross-chain interoperability, and more.
What sets Divi apart is its focus on the user experience, guiding users through the process of creating a non-custodial wallet and accessing DeFi services such as staking vaults, cross-chain staking, liquid restaking, and more. It also does away with confusing wallet addresses, and it even takes care of user’s private keys, enabling them to log in with a password that can be recovered if ever they lose it, while still maintaining self-custody of their crypto assets.
With Divi, users can even setup their own node via a few simple clicks, so they can start verifying transactions and earning rewards with absolutely no expertise whatsoever.
Provide A Little Help
If more DeFi protocols focus on simplifying the onboarding process, such innovations will rapidly become the norm, and with that they may well end up transforming the DeFi sector entirely. The goal is to make DeFi as easy to access as TradFi, and once that happens and users can see the possibilities for building wealth, accessing finance, and more, the industry is sure to see an explosion of growth.
As such, improving the user experience and simplifying the steps necessary to get started has to become a priority for every DeFi protocol. They all want more users and those users have every incentive to come – they just need a little help along the way.
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