Panelists from a recent panel discussion on institutional adoption of DeFi said that the “mind-boggling yields” in decentralized finance ( DeFi ) protocols are too tempting for institutions to resist.
Panelists from all industries agreed that while there are still many hurdles for institutions to embrace DeFi in the Mainnet 2021 event, the potential yield is attracting attention.
Andrew Keys, the Managing Partner at the crypto-focused investment company DARMA Capital says that investors can get a yield of 5% on their Ethereum (ETH) and then have a potential 10x upside in price that is “mind-boggling”.
He said that this is particularly true in today’s “interest rate-starved environment”, which is prevalent in traditional capital markets, where it is becoming more difficult to earn any yield.
Rebecca Rettig, general counsel of the lending and borrowing platform (AAVE) expressed a similar opinion. She said that traditional financial institutions are interested in learning about DeFi because they wonder “how is that possible?”
According to Keys, despite the potential yields of DeFi protocols, there are still many hurdles such as custodianship and anti-money laundering regulations and know-yourcustomer (AML & KYC), latency and gas fees.
Regulatory Hurdles
As a consequence of the regulatory hurdles, in particular, Lisa Cuesta, head of business development at the Ethereum layer-2 company Aztec, made the case that it is the more traditional proof-of-stake coins that will first reap the benefits of increased institutional interest in yield generation from the crypto space.
“Bitcoin was the gateway for institutions to get their toe into crypto, and ETH 2.0 is going to be the gateway to get into staking,” she said.
However, she also acknowledged that the space is still “a little bit far off from that, but as you familiarize yourself with Ethereum, it becomes more well-known, and staking becomes an option for institutions that will open up their minds to other proof-of-stake networks are out there.”
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