Currently, many DeFi platforms in various forms have appeared, and most of them are based on Uniswap. Therefore, there are many forms that have some of the problems of Uniswap as they are. The new form of Dex proposed by Uniswap continuously creates the liquidity that users want whenever they trade by doing the automated market making. This certainly presented a new indicator that would catch the attention of users dramatically in the cryptocurrency field.
By supplying liquidity to any pool of opened markets on the swap, the liquidity provider can earn a profit from trades that occurred in the provider’s pool. Traders can swap quickly on the pool that has been made by the provider’s assets. And each time to trade, That AMM makes a big difference until when the ratio of the pool’s token pair matches with other place’s market price through the formulated trade algorithm. So it needs a long time for the ratio of the pool corresponding to other place’s market price is reflected. Therefore, since arbitrage trading can be made through this AMM algorithm system, many people have been induced to trade naturally.
1) Impermanent Loss(IL)
For example, suppose the market price of Ethereum at the time the liquidity provider supplied liquidity to the pool of DAI-ETH pairs was $500, the value of the initial provider’s assets is 10,000DAI + 20ETH * $500 = $20,000. However, if the pool price changes when the market price of Ethereum rises to $550, the pool ratio changes through the AMM model. In this case, 10,488DAI + 19.07ETH * $550 = $20,976.59. If we look at the case where liquidity is not supplied to the pool, 10,000DAI + 20ETH * $550 = $21,000, which will generate about $23.41 IL.
However, this is called Impermanent Loss because if the raised Ethereum price goes back to $500, then disappears. But, this is exactly what happens when the pool ratio changes with price. From time to time, the proportion of the pool is constantly changing, so non-permanent losses tend to be permanent losses.
To solve this problem, ‘Balancer’ allows liquidity to be paid at a ratio other than 1:1, and’DoDo’ allows liquidity to be paid with only one specific token rather than a pair.
2) Unacceptable Inter-chain
Although many DeFi platform services have been created, they generally have not high acceptance for coins other than BTC or ETH, which have high market prices among cryptocurrencies. So users with other tokens although they were able to trade within the swap through some wrapped coins. From their perspective, it was uncomfortable to do mint rush or yield farming.
https://blockgeeks.com/guides/demystifying-defi-ultimate-guide/
Uniswap focused on the swap function, and this Ethereum-based service does not have a separate wrapping function. Therefore, all the traders can do was to do only a swap transaction using the already wrapped coins. In addition, Justswap is based on Tron, and Flamingo is based on Neo, and services are operated around specific coins based on each corresponding platform.
https://www.panewslab.com/wap/en/articledetails/N3913228.html
The initial atmosphere of DeFi was to implement Uniswap services in a specific network other than Ethereum based on Uniswap, but traders belonging to the community of each major coin were grouped and distributed into a corresponding group. As such, many attempts have been made to implement Uniswap’s model in other networks such as XRP and EOS, but DeFi, which seeks to provide comprehensive services by accommodating many and various coins, is currently uncommon.
3) Non-connectivity
DeFi calls Decentralized Finance. And This is also Finance. However, some only provide the swap function or some only provide loan services, and only services that apply it are appearing. However, it is believed that there is currently no service that combines existing swaps and loans or combines them to form true finance. In order to realize true finance, not just imitate the existing finance in the real world, It seems necessary to move the form of Legacy Finance from offline to digital for all possible financial activities in one ecosystem by planning a loan product for transactions and transactions and linking them.
4) Incompatibility
DeFi services, as well as many current cryptocurrencies, are a story unfolding in an entirely digital world. In the current cryptocurrency world, there is still an oracle problem, and most of the spot assets could not be digitized due to the oracle problem. That’s why government policies may be needed to link in-kind assets and so for these things, the anonymity that most of the cryptocurrency community pursues makes it difficult to maintain reliable transactions while maintaining anonymity.
Currently, most of the DeFi services don’t show more than just trading crypto-assets and investing and earning new tokens with existing tokens. The cryptocurrency also has the name of ‘currency’. So for expecting its useful action as currency, It must have a usage in conjunction with other assets. However, it can be said that the current situation is fueling a bubble economy where new tokens are pouring out.
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