Reputation

One of the less tangible yet significant challenges for any new technology is building a reliable reputation. Traditional centralized banking systems, which DeFi aims to replace, have excelled in establishing trust through their reliable reputations.

In a scenario where malicious actors could emerge, central banks have cultivated a perception of security by consistently handling finances honestly. This ongoing trust allows people to continue relying on them.

To fully utilize DeFi ecosystems, community members must trust the blockchain mechanisms, system security, validators, and smart contracts. Thus, a key challenge for blockchain builders is establishing a reliable reputation.

Closely tied to reputation is the issue of legitimacy. Many single-solution blockchains, like those for selling NFTs or launching new coins, struggle to establish legitimacy or regulatory confidence. Additionally, numerous newcomers in the DeFi and blockchain sectors face challenges in providing sufficient liquidity to navigate the volatility of digital asset markets and achieve sustainability and scalability.