CEO of trading firm Genesis, Michael Moro, stated that according to his views the decentralized finance (defi) space is still too risky for institutions to step in. Moro explained that there have been some important mistakes made by high-profile defi protocols that are putting customers’ funds at risk. This is why the space is being still dominated by retail investors, that have more lax risk management policies.
Defi Errors Scare Away Institutions
Michael Moro, CEO of Genesis, one of the biggest cryptocurrency trading firms in the space, stated his opinion about why defi has failed to entice institutions to invest in these protocols. According to his view, the space is still too risky and this is evidenced by some recent mistakes high-profile entities have made. In an interview with Insider, Moro stated:
Errors and mistakes that you’ve seen certainly make institutions shy from doing anything in size, in any particular platform.
Hedge funds and proprietary trading firms would be very interested in using some of these protocols for their benefit, but these institutions are not willing to suffer from big mistakes that could cost them millions of dollars. Moro stressed that retail investors were at risk, stating:
The unfortunate part is that, for now, because it’s consumers, it’s retail guys that are punting around on defi today, it’ll be they to lose their money.
Another Day, Another Hack or Exploit
The decentralized finance sector is, without a doubt, one of the most exploited and hacked in the cryptocurrency industry. This is because it is based on smart contracts that can exhibit vulnerabilities not always detectable by auditing companies. Just last week, Compound, one of the leading lending and borrowing protocols on Ethereum, experienced a bug in a smart contract that left millions of dollars up for grabs for the users of the platform.
The bug was caused by an upgrade to one of the critical contracts on the platform, that delivers rewards to users in the form of the native token, comp. This upgrade was led by community members, who wrote the modifications to the contract and also reviewed its code. To Moro, this is one of the great dangers of the sector. He concluded:
There’s a trial and error element to defi, where the error will cost a hundred million-plus. I don’t think we have a robust enough ecosystem of auditors. I think you’re still trusting someone to have audited the code.
What do you think about the Genesis CEO’s opinion on why institutions have not embraced defi? Tell us in the comments section below.