Defi Structural Risks

Problems Faced by DeFi

Since the "DeFi Summer" of 2020, decentralized finance has developed rapidly, driving the growth of core businesses such as trading, lending, stablecoins, and yield farming. However, behind this explosive growth, three systemic problems have emerged:

• High dependence on centralized stablecoins

• Unsustainable liquidity

• Inability to accumulate protocol value

These issues have created an unstable foundation for the current DeFi market, making it difficult for most protocols to achieve true self-driven growth, resulting in frequent collapses during market fluctuations. OpenFi's design aims to address these structural problems by providing solutions.

Structural Risks of Centralized Stablecoins

In existing DeFi applications, fiat-pegged stablecoins like USDT and USDC play a fundamental role in storing value and facilitating transactions. Although these stablecoins maintain price stability, they hide the following issues:

• Concentration of credit risk: Issued and guaranteed by a single entity, with opaque asset custody, exposing the protocol to potential regulatory intervention or freezing risks.

• Off-chain risk transmission: Since the dollar is the core anchor unit, extreme fluctuations in the U.S. financial markets or monetary policies can impact the overall stability of DeFi.

• Distortion of decentralization: Centralized stablecoins deviate from the DeFi principle of "decentralization and anti-censorship," creating a structural dependence on external credit systems.

OpenFi advocates a "non-pegged sovereign asset" mechanism, which builds reserves based on protocol-controlled on-chain assets, avoiding reliance on traditional fiat systems and centralized custodial credit.