Identifying the Current Gaps

What challenges do current decentralized finance (DeFi) markets face? Despite the rapid growth of DeFi, several significant issues persist that hinder broader adoption and user satisfaction:

High Transaction Fees

Many users are deterred by the high costs associated with transactions on major blockchains like Ethereum. Transaction fees, often referred to as "gas fees," can spike during times of network congestion, making it expensive for users to execute even simple trades. For instance, during peak periods in 2021, Ethereum gas fees surged to over $50 per transaction, creating a barrier for small-scale traders and those looking to engage in microtransactions.

Slow Processing Times

The congestion on popular networks leads to slow transaction times, impacting the user experience. High demand for blockchain resources often results in delayed transaction confirmations, which can be frustrating for users. For example, during times of high activity, Ethereum transactions have experienced delays of several minutes to even hours, undermining the efficiency and appeal of decentralized exchanges.

Liquidity Fragmentation

Liquidity is often spread across multiple DEXs, making it difficult for users to find the best rates and deep liquidity. This fragmentation leads to inefficiencies, as traders need to navigate different platforms to execute large trades without significant slippage. A study highlighted on ResearchGate discusses how liquidity being dispersed across multiple exchanges can create challenges in finding optimal trading rates and sufficient liquidity for large transactions.