- DeFi projects have stormed the market with more than $20 billion locked in various financial applications according to data provided by DeFi pulse, which tracks the growth of the industry.
- A DeFi project will offer services like lending, borrowing, investments, payments, analytics, yield farming, staking, and decentralized fund management.
The Key Factors to Consider While Creating a DeFi Project Are:
- The Duration for Development – Establishing a DeFi-based solution will take fewer resources and time than building a traditional centralized financial application. It involves three main phases, planning of the solution, preparation of the solution by developing it from scratch by integrating the blockchain technology and the smart contract, and testing the project extensively to eliminate any technical bugs before the official launch of the project in the market.
- Integration With Other Existing DeFi Applications – If your DeFi project is created flexibly, it can seamlessly connect with other DeFi based applications operating in the market. This will also give more benefits to the users as it provides adequate freedom for them. Enough care should be taken to ensure a friendly user interface. Your DeFi project will earn huge profits if it is highly unique and provides a futuristic solution by ensuring cost efficiency.
- Respond Swiftly to the Questions Posed by Your Target Community – Always keep in touch with your target audience regularly. They can give you interesting inputs and new ideas that you can add as features in your platform. This helps in boosting the retention rate as well as enhancing the overall user experience on the platform.
- Evaluating the Functioning of the Business – Extensive analysis will be required to ensure that your idea is economically and technically feasible to implement in the market. It involves a long phase where an adequate amount of capital and high-level technology is needed. It also would require a solid architecture to be created for the DeFi project.
- Have a Solid Team in Place – Developing a DeFi project requires the presence of experienced blockchain developers, financial analysts, frontend developers, backend developers, customer support, project managers, programmers, coders preparing the UI/UX, smart contract creators, and marketing specialists.
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The Various Challenges to Face While Building a DeFi Project
- Gas Optimization – Gas fees have to be paid while using a blockchain network. It will be received by miners as they consume a lot of computational power. Less experienced blockchain developers lead to more expenses incurred on contract usage. This can affect the onboarding of new users into the project as they will be hesitant to pay a high gas fee. Gas costs can be reduced through a variety of ways like using 256-bit variables, storing data in the contract’s bytecode, splitting the function parameter, and backing up data on IPFS (InterPlanetary File System).
- Upgradation of the Contract – Whenever new features are added in the DeFi project, it requires the existing contract to be upgraded smoothly without any additional deployment of technology. This also helps in the prevention of outflow of assets by the existing users from the project. OpenZeppelin is one of the secure avenues for building a robust smart contract by using the Solidity programming language. It contains different tools and SDK integration.
- The Absence of a Full Unit Test Coverage – The smart contracts act as the backbone of the DeFi project and if it is not coded properly and contains bugs, it can damage your firm’s reputation in the industry. If extensive testing is done beforehand regarding the functioning of smart contracts, it will help in eliminating all the vulnerabilities successfully. This ensures that the users have a reliable and safe trading experience.
- Not Conducting a Security Audit – DeFi projects that do not consider the security of users’ funds and data seriously will fail miserably when they launch their services in the market. A thorough and in-depth security audit by an external provider will ensure that users retain trust in your project and are confident enough to use your products and services. It should be safeguarded from any hacking and phishing attacks.
- Inadequate Project Testing – The entire DeFi project needs to be tested fully before it arrives in the market. It has to be run on your own blockchain network. The developers can make necessary adjustments based on the feedback received from the preliminary run. Then, you can test it on either Ropsten or Kovan, which are well-known public testnets. Transaction debugging can be sorted out by utilizing Tenderly, which is a smart contract monitoring program. It ensures that transactions are processed quickly and safely and permits real-time tracking.
As seen above, make sure to note all the points mentioned above when you are developing your DeFi project. Technical expertise in blockchain technology will not prove to be enough unless it is backed by sound financial and business analysis. It takes a substantial amount of resources and time to build a successful DeFi project that can create ripples in the industry.