Running a business is a challenge at the best of times, but throw in a pandemic and the associated economic woes – and cost cutting has never been more important. So, in what areas could your business improve on when it comes to keeping that expenditure down? Let’s talk…

Vu Tran, Co-Founder, Go1

There are many ways SMBs can cut costs, but given the pandemic, it’s even more important than ever to balance any action with staff wellbeing. 

Conduct an audit of your biggest cost centres. It’s important to have a clear view of all expenses to help guide which costs can be slashed. For example, could a virtual assistant replace the administrative tasks of a few people so they can provide higher value contributions that can have a greater impact on revenue?

Staff training is another secret weapon – with minimal investment, it can do wonders for the productivity and morale.

With remote working and hybrid working set to continue, reducing office space may also be desirable. For some businesses, switching from traditionally leased space to an on-demand co-working space (or desks) could offer further cost savings.

Stephen Barnes, Principal, Byronvale Advisors

In a time of crisis in a business, like most businesses are facing now with COVID-19, it is vital that decisions are made. 

With cost cutting, go fast and go hard. 

If you suspect that sales are going to decline, and debtor days are going to lengthen, cut back your overheads now.  Waiting until the sales slow and the cash cycle lengthens, or waiting to see what happens in a week, a month or a year, is to me like watching a car crash in slow motion. 

Cut back your overheads now and cut them back hard. Then, when circumstances improve, grow these expenses slowly. You might even find you come out of the crisis a lot stronger and leaner business.

Dunya Lindsey, COO, Wiise

Amid the pressures of COVID, many businesses have had to take a good hard look at their expenses to determine where cost-savings can be made. In a time where survival is key, cash flow becomes absolutely critical – running lean is a priority right now.

Automation is one way to save costs. Labour-intensive, manual processes such as re-keying information are a direct hit to a company’s productivity and ultimately cash flow. Automation enables staff to spend more time on higher value tasks such as maximising sales, keeping customer satisfaction high, or getting orders out in time.

Understanding the true cost of sale is also key. For manufacturing and logistics businesses, freight costs have rocketed, likewise the price of imported goods. The cost of sale has to be recalibrated. To do this manually is very complex, but cloud-based ERP systems can automatically recalibrate costs due to changing shipping fees and taxes to ensure a profit is always being made.

Ollie Watts, Co-Founder, Hey Bud Skincare

Applying cost-cutting methods can bring immediate savings and improvements to the profitability of your business. As a growing E-Commerce store, Hey Bud Skincare constantly requests updated contracts from its courier and handling companies as well as its payment processors. Talk to these companies and they will provide baseline figures to achieve these cost savings.

As a start-up, invest your time in learning new skills (such as media buying, website development or video editing), if it helps you grow your business without risking your long-term goals. You’ll save on outsourcing fees and learn a useful skill set at the same time. 

It’s also who you know that brings success in cost-cutting. Reach out to people who have more experience in the same field and industry than you – they can save you time and money by sharing with you their costly mistakes which you can avoid, and also provide tips that can optimise and grow your business. 

Jarrod Kinchington, Managing Director, Infor ANZ

As companies embark on digital transformation journeys, there are significant savings to be made by adopting infrastructure – and software as-a-service solutions, and replacing the “traditional” hardware and software approach. Choosing the right cloud partner not only saves money, but provides the ability to rapidly scale your business accordingly and remain resilient in today’s business environment.  

Intelligent solutions that include automation, machine learning, asset management and workforce scheduling can reduce hours of mundane tasks and administration, giving employers the opportunity to re-purpose their staff to focus on higher-value work.  

Modern and industry-specific software, purpose-built for different micro-verticals, can help simplify business processes and foster closer collaboration amongst employees – especially in the new remote and hybrid working world.

More advanced organisations are expected to accelerate their adoption of artificial intelligence and business analytics that will enable them to accurately forecast supply and demand in real-time.

It’s also important to audit the services you currently have and discontinue those you no longer use (but are still paying for) as well as duplicate services you may have subscribed to.

Ryan Miller, CEO, Keeping Company

If you start any cost cutting exercise by first targeting the line items in the budget which cost the most, you’ve missed a critical step – aligning cost cutting with the business strategy.

Start with the business’ overarching strategy. What will achieve a return on investment against your strategy and what won’t? Going paperless, renegotiating supplier contracts and cutting discretionary costs like entertainment or gifts will deliver savings without impacting your business goals. However, making overly deep cuts to headcount, for example, could lead to the business becoming too under-resourced to achieve your strategic goals.

Other options for cutting costs include outsourcing or automating tasks, transitioning to a partly or fully virtual office, changing banks to a more cost effective facility, consolidating any credit cards or establishing a system to automate payments or provide reminders to make payments so you can avoid unnecessary late fees.

Joseph Robins, Payments Expert, GoCardless.

According to the Forrester report, 85 percent of businesses have more than 20 people responsible for managing payments, and more than 60 per cent of surveyed payment decision-makers said the most time-consuming areas are matching payments to invoices, and reconciling reporting from different gateways or processors.

This more than often means that businesses of all sizes need dedicated staff to manage the different stages of the payment process, be it manually entering payment details into a legacy system, generating payment files to be submitted to a bank, manually reconciling each day or chasing late payers.

There’s a big misconception in the difference between price and cost when it comes to a payment solution. Your “cheap” provider may charge you cents in transaction fees, but could be costing you thousands of dollars in human intervention. Now imagine those staff are freed up to work on “value-add” initiatives like expansion or increasing sales, and it quickly becomes evident that spending that bit more for a fully automated solution can have a huge impact on your business as a whole.

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January 18, 2021 8 min read

Opinions expressed by Entrepreneur contributors are their own.

Decentralization is the current trend in the global financial market. However, it’s far from the only innovation that the industry has seen in recent times. As aim to accelerate their capital raise, such businesses have taken to innovations toward opening their companies to public investment.

This can be accomplished in several ways. You may recall Bill Ackerman’s $4 billion blank check company created to buy a yet-to-be-named . Likewise, there is news about ’s planned shell company in the U.S.

Such shell companies are often utilized as special-purpose investment vehicles as part of a company’s strategy for reducing the financial risk or improving the efficiency of certain financial activities. For one, utilizing a reverse merger scheme with a public shell company can save millions of dollars in underwriting and listing fees, as well as shorten the time in which a business can get publicly listed on the .

Kings of Shells

The strategy being undertaken by Ackerman or Softbank is not exactly new. In the late 1990s, Aaron Tsai, Chief Capitalist at MAS Capital, Inc., used public shell companies as a strategy for bringing businesses public in a shorter amount of time and lower expenses than a regular IPO. Tsai created 101 shell companies, cashed in on the trend and became a multi-millionaire by the age of 29.

Tsai was described by the Wall Street Journal as a businessman “at the leading edge of the resurgence of ‘blank check’ or shell companies.” Not many were convinced it was a good idea to build a business model out of companies with very few assets and barely existing income, products, business activity or a long-term plan. But Tsai saw profitability in dealing with these “companies in the business of doing nothing.”   

Shell companies were not a new idea when Tsai saw the potential of generating millions with them. However, because of the ’s unexpected gains in the 1990s, largely driven by internet-related offerings, there was renewed interest in these instruments. Only a few discerning businessmen would have perceived this value, though. Tsai was one of them.

Tsai used his public shell companies for reverse-merger deals as an alternative strategy to underwritten IPOs. He merged his shell companies with other corporations, getting a portion of the merged company’s outstanding shares in return. This accelerated the public listing process for these businesses and resulted in considerable returns for Tsai, as well.

This strategy not only helped his own business, it also benefited other companies that struggled to raise capital during the dot-com era. Even before 2000, Tsai saw the potential of the internet to become a tool for investing success. “We believe the internet will open the equity markets to individual investors, create alternative stock-trading systems for them and thereby change the model of capital formation that exists today,” said Tsai in his Journal interview. 

Are shell companies still relevant now?

The way shell companies are used now may not be the same as how they were employed in the past. However, the core idea of the purpose of having these companies, at least in the legal or legitimate sense, remains unchanged.

In a way, they have evolved into something with a less disconfirming connotation: special purpose acquisition companies (SPACs). A recent report reveals how SPACs have been booming and are likely to perform even better in the year ahead. In 2020, SPACs have outnumbered traditional IPO deals, 200 to 194. Interestingly, SPACs and traditional IPOs raised almost the same accumulated amounts of capital. Companies that went public using SPACs raised a total of $64 billion, while underwritten IPOs managed to generate $67 billion.

Paul Dellaquila, head of the Defiance Next Gen SPAC ETF, says that SPACs will only become more prominent in 2021, as many big names are already behind them. The entry of Virgin Galactic and DraftKings, for example, is giving SPACs more credence. Dellaquila adds that sports teams may also decide to go public, and SPACs will be their likely vehicle in doing it.

Moreover, a recently released Goldman Sachs forecast paints a rosy outlook for blank check companies, saying that a surge of these entities could drive $300 billion worth of in 2021 to 2022. Suffice it to say, Tsai’s expertise and experience with shell companies continue to be a live round in his ammunition stock. His insights on blank check companies are useful in light of the growing prevalence of SPACs. According to BTIG, there are more than 200 SPACs currently seeking acquisitions over the next 18- to 24-month period.

Moving forward with decentralized finance

Even before 2000, Tsai already saw the potential of the internet to become a tool for investing success. “We believe the Internet will open the equity markets to individual investors, create alternative stock-trading systems for them and thereby change the model of capital formation that exists today,” Tsai added to the Journal.

Inferentially, Tsai already had the idea of decentralized finance at the back of his head. He foresaw the concept of individual and institutional investors snagging investment opportunities of various types in different parts of the world. He did not see the advent of blockchain, smart contracts, FinTech and decentralized finance, but he knew that someday everyone would be able to participate in investments globally through the internet.

As the latter part of the 2010s saw disruptions in entire industries brought about by blockchain and digital token offerings, Tsai once again demonstrated his resilience, versatility and ingenuity. The relentless capitalist learned to adapt and explore new technologies and business models.

Thus, MAS Capital Group, Inc., was founded. This new venture operates as a financial advisory business under the management of financial professionals based in Asia. This marks Tsai’s foray into decentralized finance. He started testing new waters and again demonstrated his knack for innovation.

Tsai saw how billions of dollars in digital currency went to Initial Coin Offerings (ICOs). At the same time, he observed the gap in how investors conducted due diligence when it comes to securing capital. This new business landscape inspired the creation of new services, which led to the founding of MASEx.

MASEx has been in operation for more than a year now, and the company plans to pursue further growth by engaging emerging economies through an AI-powered decentralized platform. The company aims to expand its STO ecosystems to enable the unbanked and underbanked to participate in investment opportunities. 

Tsai realized how STOs are set to form part of the new normal in investing and capital raising, especially in Asia. “As we enter a new decade, do not be surprised to see the largest STO exchange in the world based in Asia or China.” 

To be clear, his message was not a rebuke to traditional financial institutions but a challenge for everyone to level up if they want to retain control or take the dominant role in the global financial industry.

The need for regulation in decentralization

Even with all the promised benefits of decentralization, there are still crucial challenges. In STOs, in particular, there are stumbling blocks that prevent companies and exchanges from achieving optimum outcomes. Tsai points to regulatory compliance as the main challenge, especially its implications when it comes to due diligence and regulatory checks.

“We are going through a seismic shift that extends across the entire financial industry. This will disrupt the existing oligopoly of financial institutions in banking, securities and fund management sectors. Regulators must rise to the occasion,” Tsai said during a keynote speech in 2019.

It may seem counterintuitive, but the MASEx Founder and DeFi advocate calls for the urgent regulation of STOs which are decentralized by design. He describes the spirit and letter of the U.S. securities laws as in need of a refresh. They are not in tune with the disruptively accelerating trend of digital currency adoption, financial decentralization and self-regulated Security Token Offerings.

DeFi companies often feel challenged with regulations that limit what they can do. At the same time, they find it problematic when there are no regulations in place to assure customers, investors, or traders that the digital assets they are getting from a decentralized financial market bear real value.

Defying obstacles with DeFi

Decentralized platforms transcend geography, although partnerships with key industry players will be essential in achieving trust and traction. 

Technology has proven time and again that innovations have the ability to identify trends that enable success. It can also help businesses worldwide with their attempts to attract funding by going public.

Regulatory requirements make it difficult for many companies to get publicly listed. Through STOs and even with the innovative business model with shell companies, the long and tedious process of raising capital can be reduced significantly.

However, it is also important to take regulation into account. Decentralization has numerous advantages, but without regulation to provide assurances to investors and consumers, it will be difficult to attract investors into trusting new and security classes. Regulation and compliance build trust, and this may just be what DeFi needs to gain traction in the financial community.

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December 16, 2020 5 min read

Opinions expressed by Entrepreneur contributors are their own.

For any startup or , gathering a base of active users or followers is essential for an effective marketing strategy. But community-building has become particularly imperative within the and sectors, whose adherents are digital natives who form global tribes around their favorite tokens, platforms and exchanges. 

However, in today’s crowded crypto-marketplace, building a loyal community means more than merely growing your following. After all, the lifespan of a typical tweet is a matter of minutes, which explains why crypto crowds tend to gather on other platforms such as Telegram or for a more meaningful conversation. 

Nevertheless, many projects have taken to more innovative ways of building their profile among the blockchain community beyond the boundaries of social media. Here are three examples of ways to create a more lasting, positive impression to inspire a long-term crowd of followers for your project or startup. 

Related: Getting Drawn Into DeFi? Here Are 3 Major Considerations

Hold a hackathon

Holding a hackathon is a sure-fire way of attracting programming talent and development activity to a blockchain platform. The concept is popular among many kinds of tech companies and developers. In the context of blockchain, a platform’s founders or operators will usually offer some type of incentive to participants in exchange for their creative contributions. 

Often, hackathons have been held as part of blockchain-developer conferences or events. However, with the social restrictions currently in place, many projects are forging ahead with remote hackathons, and with a high level of participation and success. 

One recent example is Maxonrow, an enterprise blockchain company developing regulatory-compliant products and services that recently hosted its first-ever hackathon, dubbed MAXathon, entirely online. Maxonrow was seeking creative input to develop blockchain-based solutions to some of the most critical challenges facing governments and businesses due to the pandemic. Participants could form teams to work on one of five tracks, covering solutions for managing physical distancing, issuing credentials and certificates for test results, and improving the transparency and efficiency of welfare programs. 

The event was a huge success, attracting participants from more than 30 countries who competed for a share of a prize pool worth more than $17,000. Winning projects included an algorithm that determines a safety score so that people can avoid crowded places and an application allowing people to apply for grants and stimulus packages. 

Along with the prize fund, participants in a hackathon also have the opportunity to connect with judges and mentors who are leading figures within their respective specialisms. Therefore, it can provide intangible networking benefits, particularly to newer programmers, creating a lasting bond to the projects and companies that enabled such an opportunity. 

Help to educate newcomers

Blockchain and cryptocurrencies are chock-full of jargon, acronyms and technical concepts that can be off-putting to many newcomers. Not to mention, starting to invest or trade in cryptocurrency comes with particular risks that everyone should be aware of before they start. 

For this reason, those companies that can provide newcomers with a comprehensive library of educational materials have an opportunity to inspire loyalty from newcomers. One example is Indian cryptocurrency exchange Bitbns, which has created its own multimedia academy targeted at those eager to learn about cryptocurrency. 

Users can navigate through successive modules of videos and written articles, the latter of which can also be consumed in audio format. Starting from the very beginning with an introduction to cryptocurrency, would-be traders can learn about more complex concepts covering risk management, margin and investment analysis. 

Providing newcomers with the information they need to get started and protect their investments is an excellent way to inspire long-term customer loyalty. 

Collaborate with other projects

The fact that the cryptocurrency and blockchain sectors have become so crowded isn’t necessarily a bad thing. Collaborating with other projects offers an opportunity to create something with value to users that’s greater than the sum of its parts, with the added benefit of cross-pollinating between the communities of different projects. 

is a concept familiar to the team behind Kava, an application that was founded on the principle of interoperability between blockchains and is part of the growing decentralized finance movement The project has a long history of collaborating with Binance, having launched its initial token sale on Binance’s Launchpad towards the end of 2018. 

More recently, Kava has announced a new collaboration with a club comprising investors of Binance’s BNB token, called BNB48. The collaboration is aimed at raising awareness of the opportunities in decentralized finance for BNB holders. The project has also recently launched its own automated money market, called Hard, allowing users to lend, borrow, and earn with assets including Bitcoin, XRP and BNB. 

By integrating and collaborating with different platforms and tokens, projects can tap into the support of a broader community of followers.

Related: Cryptocurrency Innovators Need to Simplify User Experience

The cryptocurrency and blockchain space may be tribal, but projects and companies should use this to their advantage. By taking a community-building approach, they can build a loyal following, creating a long-term user base that will, in turn, help to spread the word about their products and services. 

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November 23, 2020 6 min read

Opinions expressed by Entrepreneur contributors are their own.

is disruptive, but it doesn’t change . In fact, and Aristotle considered — which has roots in the ancient Greek word “techne,” or craftsmanship — an extension of nature. Today, many innovators’ techniques are flawed. Exciting solutions are unnecessarily complex, hard to understand and impractical. 

Regular folks don’t meddle with applications like crytpocurrencies, therefore tokens are derided with nicknames like “shitcoin.” It’s an innovation that elides potential target customers like small- owners who are too busy to read a technical manual.

Simple vs. Complicated Currency

Human nature should encourage technologists to create a streamlined user journey. In the office, people want ergonomic furniture so that work is pleasant and effortless. And when it comes to the wallet, people want currencies that are simple and don’t fluctuate in value. Aristotle’s commodity theory of money declares that money is a commodity with three functions: medium of exchange, a unit of account and store of value.

But to function in daily life, money should be convenient to handle, store and transport. It should be easy to measure and divide. And money should be difficult to destroy so that it lasts many generations.

Fiat works well, but its major weakness is the destruction of purchasing power by a quantitative easing of central banks around the world. Since the issued the current version of U.S. dollar in 1913, the greenback has lost almost 97% of its value. 

Related: What’s Next for PayPal After Integrating Cryptocurrencies?

That’s unacceptable. And so it creates an opening for Bitcoin and non-sovereign, decentralized coins to become newly accepted denominations of money. Unfortunately, cryptos fail to fulfill the aforementioned essential functions. (Yes, Bitcoin is sustainable, but many wannabe currencies have precipitated the loss of hard-earned wages and savings, resulting in the loss of trust in unbacked mediums of exchange.)

Regulators’ Sanctioning of Digital Coins

Governments and central banks are cautiously exploring, experimenting with and regulating digital currencies, and that’s because history is on the side of digital, not paper. Moreover, officials are recognizing that fiat users want borderless and frictionless transactions. If they don’t give what the customer wants, then part of the population may leave for the crypto Wild West for good due to lack of alternatives.

In September, the Office of the Comptroller of the Currency issued a letter that allows regulated banks and thrifts to hold deposits as reserves for stablecoins that represent the U.S. dollar. Stablecoins aren’t the same thing as Bitcoin or other non-sovereign coins, but they at least provide tokenized, borderless and frictionless settlements.

“Companies that issue stablecoins often desire to place the funds backing the stablecoin, or reserve funds, with a U.S. bank,” the letter states. “Public independent auditors’ statements of several stablecoin issuers indicate reserve funds are placed as deposits with U.S. banks. Several of these issuers promote these reserves — and the fact that they are held by banks — to support the trustworthiness of their stablecoin. In light of the public interest in these reserve accounts, this letter addresses the legal authority of national banks to hold stablecoin reserves on behalf of customers.”

Aside from 1:1 pegged stablecoins, state regulators are making fiat and cryptocurrencies interoperable for daily use. Last month, the Wyoming Board approved Kraken’s application for a Special Purpose Depositary Institution (SPDI) banking charter. 

The -based crypto exchange “will be the first regulated, U.S. bank to provide comprehensive deposit-taking, custody and fiduciary services for digital assets,” according to a Sept. 16 company announcement. “From paying bills and receiving salaries in to incorporating digital assets into investment and trading portfolios, Kraken Financial will enable Kraken clients in the U.S. to bank seamlessly between digital assets and national currencies.”

Creating a Streamlined User Journey

Blockchain innovators are realizing the critical need to make the customer journey painless and effortless. In September, crypto exchange BitMax.io announced support of deposits and withdrawals with FIO Addresses. These are human-readable addresses (like bob@wallet) as part of FIO Protocol’s initiative to make crypto products usable by anyone. Cryptocurrency addresses can have dozens of characters that make irreversible errors common, and simple addresses are considered by some observers as a step in gaining more mainstream adoption.

Moreover, FIO Requests let users respond to requests for funds knowing the exact amount and proper token chain. As more tokens like USDT operate on multiple chains, it’s becoming important that users only send tokens from the expected chain. The blockchain industry is heading down the path of cross chain communication. Such details can be hidden from the end user with FIO.

HARD Protocol is another example of how cryptocurrency can become more integrated and user-friendly. Tapping into the appetite for decentralized finance, HARD Protocol allows users to lend, borrow and earn with their digital assets. However, whereas DeFi has evolved to be hard-wired to Ethereum — and as such, clunky and difficult to use — HARD Protocol is transcending global investments through crypto technology. It’s based on the Kava DeFi hub, providing an intuitive user interface along with cross-chain capabilities, supporting multiple assets, including BTC, XRP and BNB. 

Cross-chain interoperability is proving to be a big hit among holders of non-Ethereum assets who were previously locked out of the so-called “open finance” ecosystem. HARD Protocol only launched in mid-October; however, it already shows close to $19 million in value locked at the time of this writing. Further, HARD Protocol and Kava are also the only DeFi protocols supporting multi-chain assets. 

Related: Cutting-Edge Online Financial Strategies for the General Population

Money should be easy to use, convenient and difficult to destroy. Innovators can and do more to make the simple and pleasant.

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September 30, 2020 8 min read

Opinions expressed by Entrepreneur contributors are their own.

If you’ve had even half an eye on the space in 2020, then you can’t have missed the surge of news stories and emerging projects around . Short for decentralized finance, the proponents of this segment hail it as a revolutionary new financial system in which anyone can become a borrower, lender, speculator or investor using decentralized protocols. 

It’s certainly true that there are no barriers to entry. Unlike a traditional financial setup where users would have to overcome several KYC barriers to open a bank account, request a loan or start trading stocks, decentralized finance is unregulated and, for the most part, free of any restrictions. And it’s not just users who benefit. Anyone with programming skills, or the ability to procure them, can put their entrepreneurial skills to work by setting up a decentralized application and start issuing financial instruments on .

It sounds easy enough in principle. However, before entrepreneurs rush out and start building their own DeFi applications, or start researching their first DeFi investment, there are several considerations worth taking into account. 

Related: How DeFi Will Reshape Financial Services

1. Existing infrastructure can’t necessarily cope with market volatility

Flagship DeFi project Maker suffered one of the most high-profile DeFi incidents of this year during crypto’s “Black Thursday,” when the value of the world’s markets plummeted on March 12. Maker is the -based project that issues a dollar-pegged stablecoin called DAI, based on smart contracts called Collateralized Positions. Users deposit ether as collateral and take out DAI loans that they can stake in other DeFi applications to earn interest. 

As the price of ether dropped dramatically, users of Maker suddenly found their DAI loans were undercollateralized and tried desperately to increase their ether deposits to stop the system from liquidating their positions. Ethereum is notoriously clunky during times of high traffic, and many of those who didn’t make it on time had their loans liquidated. Some users lost hundreds of thousands of dollars due to the speed and scale limitations of the Ethereum Network. Some of those positions that should have been liquidated weren’t, due to the fact that Ethereum couldn’t update price information from external price oracles quick enough. 

To make an already bad situation even worse, when Maker liquidates a contract, it doesn’t cancel it. Instead, the loan is auctioned for DAI. Amid the chaos, the sharks started circling and managed to buy $8.32 million worth of loans for zero DAI. 

2. Ethereum scalability is a DeFi bottleneck

While the issue of smart-contract vulnerabilities isn’t necessarily specific to Ethereum, the platform has been struggling with scalability issues since 2017. An upgrade, dubbed Ethereum 2.0, has been in the pipeline for several years now. However, the phased implementation means that the scalability challenge is likely to persist for longer yet. 

These scalability limitations make Ethereum vulnerable to other platforms developing more scalable blockchains. From a DeFi perspective, Ethereum’s most significant advantage is that it’s already home to so many applications, offering a high degree of interactivity. This is where competitor platforms such as EOS or Binance Chain tend to be at a disadvantage. 

However, second-layer solutions developed on the Ethereum base layer offer the ability to scale without needing to depart from the overall Ethereum ecosystem. For example, Matic Network, which received early backing from Coinbase Ventures and launched its initial token sale on Binance’s Launchpad platform. Compared to Ethereum chugging along at 15 transactions per second, Matic can handle 65,000. If Maker had been running on Matic, it could have perhaps avoided the cascade of issues it experienced on Black Thursday. 

As second-layer solutions aim to solve the problems within the Ethereum network, many entrepreneurs are looking for greener pastures where the Ethereum blockchain falls short. Ethereum, a layer-one blockchain, is seeing some competition related to DeFi specific blockchains built using the Cosmos SDK. Because the Cosmos technology enables interoperability, blockchains powered by the technology are seeing an uptake in users who find the safety and security in a layer-one Ethereum alternative. 

I reached out to the engineering team at on such blockchain built using the Cosmos SDK, Kava Labs, to find out why Ethereum has scale and security issues. Lead Engineer Kevin Davis blames the architecture, saying, “ Every DeFi hack in the past two years are a result of bugs in the code. Many would not have happened if they were written in a different language. Go is a reliable modern and safe language to use for a wide range of applications where you need security and reliability. Just like on Ethereum the base chain that supports these products, secures and stores the assets, becoming the foundation for DeFi as we know it.” However, this technology is in the early stages and DeFi is a new emerging market.

In the early 2000s, there was , and it was hard to write websites to work well on it. Then came and Chrome. Both were rewritten from the ground up to be easier and safer. Then all these new websites came out like Google and Facebook, and now Chrome has become the defacto browser that everyone is building their websites to optimize for. No today makes it a priority to optimize their website to run well in Internet Explorer. 

3. Ethereum transaction fees are currently sky-high

Another reason for using a more scalable platform is the transaction fees on Ethereum. The current transaction pricing mechanism is a direct function of network congestion. The higher the volume of traffic, the more users will pay in transaction fees. 

Due to a dependence on complex smart contract transactions, DeFi fees can reach exorbitant levels, as high as $99, according to some reports. The founder of decentralized derivatives application Synthetix went as far as to warn that these high fees pose a risk to the growth of DeFi. 

“Because of the limitations of the Ethereum network users don’t have the freedom to make all the decisions they want,” says Denali Marsh, an engineer at Kava Labs. “For example if a user wants to diversify into 30 yield farming pools, it’s going to cost them nearly $3,000 in gas fees, and it’s not worth their time unless they’re yield farming with millions of dollars. A 3 percent yield on $100 million is a great return on investment, but you have to be trading with at least a million for it to be worth your time. For the considerations of cost savings alone, blockchains built on the Cosmos SDK like Kava make DeFi scalable and affordable for everyone to participate, not just the highly capitalized users.”

Better Infrastructure and More Transparency Are Key to DeFi’s Future

DeFi is undoubtedly an exciting place to be right now and poses many attractive opportunities for intrepid entrepreneurs. Nevertheless, it’s worth understanding the limitations of Ethereum and investigating the individual project as much as possible before playing with these products. As ever with cryptocurrency, the often-used advice to “do your own research” is in no immediate danger of becoming outdated. 

Thankfully, there are those in the crypto space who recognize that there’s an information gap particular to DeFi, as users don’t have any easy or transparent means of researching up-and-coming projects. MarketPeak is a relatively new entrant to the sector, a fundraising platform for DeFi entrepreneurs. However, as part of an effective fundraising strategy, MarketPeak provides investors and market participants with in-depth research regarding the projects on its platform. 

Even players from the centralized cryptocurrency space are seeing opportunities to get involved with DeFi from the perspective of helping to educate users. As Jack Tao, CEO of Singaporean-based exchange Phemex, told me, “DeFi opens a brand new world with its own set of rules, creating an opportunity for established firms to participate as a source of education and knowledge on how to properly use these emerging products. The idea of decentralized finance does have a lot of inherent value. However, some of these governance tokens are simply overpriced, and it’s important that market participants understand the risks.”

Related: The Great Potential Of Decentralized Finance in 2020

In the earlier years of cryptocurrency, it was often described as the “Wild West” of investing, and the same could be said of DeFi right now. However, the cryptocurrency segment quickly matured, and it seems like only a matter of time before DeFi does the same. With faster and more secure infrastructure, along with more transparency and accountability from project operators, DeFi stands a good chance of establishing a place for itself in the future of finance.

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