The Cryptocurrency and Blockchain markets have now come to a brief phase of monotony post a prolonged bearish run for the last couple of months. While many took advantage of the bull run to make a quick buck, a lack of proper understanding of the market and challenges existing in the blockchain ecosystem has resulted in many investors suffering huge losses. This bearish run which began three months ago resulted in many investors and traders losing their entire deposits, some to scammers/hackers and some as a result of bad investment decisions. While it does help to analyse and understand the assets before making an investment, understanding some of the challenges in the industry helps make better investment decisions.
Liquidity & Volatility: Given the fragmented nature of today’s blockchain ecosystem and a lack of proper sophisticated cross-chain solutions, there is improper circulation of tokens across a wide range of dApps and DEXs. This situation has resulted in an irregular movement of assets creating a liquidity crisis and highly volatile price fluctuations in the market.
Classification of Tokens: The tokens/digital currencies are viewed as both currencies and assets. Based on the classification of the token as currency or an asset, its use case scenario could vary widely. Due to the lack of proper classification for tokens as a financial instrument, be it a regulatory compliant CEFI structure type exchange or a non-regulated decentralised exchange, they often suffer from the pursuit of various regulatory authorities/organisations which also greatly affects both investors and businesses.
Complex Use Case Environment: Despite decentralized finance and blockchain displaying plenty of potential, there is hardly any real-world use case implementation for digital currency at an end-user level. Participants in the crypto market today are either cryptocurrency enthusiasts or banks and various financial institutions who wish to take advantage of the value of digital currency to make quick bucks. The market is fragmented and not every user knows how to go about swapping tokens in hand for required tokens to make transactions greatly limiting the adoption and realisation of the true potential of cryptocurrencies.
Need for Regulatory Guidelines: The essence of the blockchain ecosystem and cryptocurrency is a non-regulated, non-centralised and trustless ecosystem. But, such an environment has given rise to lots of potential scammers and hackers who manipulate the market to cheat investors of their funds. Certain regulatory guidelines which prevent users from certain financial practices can help a great way in safeguarding investors. While this does happen in today’s markets in form of DAO which can to a certain extent act as regulatory or legal bodies, most DAOs are formed after problems occur in a network and are aimed at tackling the issue. There is a need for more DAOs which proactive help regulate financial practices and are also capable of holding sway over multiple blockchains at the same time. An example of practices which need more supervision is when the Proof of Stake chains sees its founders or 1% whales who hold the majority and are able to manipulate markets easily.
Proper Awareness: This one is more related to users than businesses. An investor/user clearly needs to study and understand their actions when they choose to support or make an investment. A lack of understanding of the asset and firm they are dealing with can also greatly affect the quality of their investment activities. An example is when users just follow the general trend and influencers and choose to invest in any random tokens during bull runs without clearly understanding the background of the project those tokens belong to. So when the market realises that the project has no value and the bull run ends, the users with a lack of proper awareness may not be able to recover investment fast enough resulting in a huge loss.
Here at Kana Labs, we address some of the issues blockchain and crypto community face in general via our multi-chain Defi super app which supports multiple blockchains. Users can hold their assets from different blockchains in multiple wallets under a single user interface and gain the best pricing for their investment activities via our true on-chain cross-chain solutions supporting the platform with aggregation solutions. Be swap, stake, lend or borrow our users can trade with a curated list of popular tokens from a wide range of source blockchains and EVMs such as Solana, Aptos and Neon Labs. Our platform is available as both a mobile application and a web plugin. You can check us out at — https://kanalabs.io/
