Genesis trading company CEO Michael Moro said he believes the decentralized finance (challenge) 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 still dominated by retail investors, who 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 him, space is still too risky, as evidenced by some recent mistakes made by leading entities. In an interview with Insider, Moro stated:
The mistakes and mistakes that you have seen are certainly preventing institutions from doing anything in terms of size, on a 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:
What is unfortunate is that for the moment, because it is the consumers, it is the traders who are challenging today, it will be them who will 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. Indeed, it is based on smart contracts which can present vulnerabilities not always detectable by audit 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 platform’s critical contracts, which offers 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 is an element of trial and error to challenge, where the mistake will cost over a hundred million dollars. I don’t think we have a robust enough ecosystem of auditors. I think you still trust someone to have audited the code.
