Source: Cointelegraph
Original: (Decentralized Finance (DeFi) must return to its P2P roots for mass adoption)
Author: Jean Rausis, Co-founder of SmarDex
Decentralized Finance (DeFi) initially carried a clear vision: to establish a global permissionless financial system based on peer-to-peer (P2P) transactions, free from the shackles of traditional finance (TradFi). Early lending platforms perfectly embodied this concept, allowing both parties to negotiate terms directly, escaping the rigid framework of traditional finance.
Unfortunately, most DeFi protocols have gradually deviated from their original intent, abandoning true P2P interactions in favor of liquidity pools, external oracles, and highly automated market maker (AMM) mechanisms. Although these designs have released liquidity, they have done so at the expense of user control and transparency, further exposing the system to the risks of centralized manipulation by 'oracles.' Today, users are trapped within predefined liquidity pools, unable to autonomously choose collateral assets or effectively manage risk exposure.
What’s more tragic is that even the so-called leaders of DeFi have violated the most basic principles of decentralization. Recently, the Hyperliquid exchange manipulated oracle values to intervene, causing its total locked value (TVL) to plummet from $540 million to $150 million; this farce has completely torn apart the industry's facade.
Clearly, DeFi has lost its direction. To break the deadlock, it must return to its roots.
The original intention of P2P
When DeFi first entered the mainstream, P2P lending was its foundation. People could complete loans directly through smart contracts without going through banks or centralized exchanges (CEX), agreeing on collateral types, interest rates, and other terms. This transparent, trustless model was a revolutionary breakthrough, but as liquidity demand grew, developers gradually shifted toward capital pool systems.
The liquidity pool does indeed enhance capital efficiency: borrowers can access funds instantly, while lenders can earn returns without waiting for manual matching. However, this design sacrifices the most precious quality of DeFi—the true P2P autonomy. In the capital pool system, users once again become passive recipients of rigid rules.
When the new generation of DeFi protocols forgets their origins, they abandon not only the P2P spirit but also violate the golden rule of decentralization, ultimately ending up on the same path as the centralized systems they claim to disrupt.
The illusion of decentralization
The Hyperliquid incident has completely exposed the vulnerabilities of 'pseudo-decentralization.' Although the exchange claims to use independent oracles, it retains the power to intervene in pricing. This emergency intervention may have prevented greater losses, but it utterly shatters its promise of decentralization—platforms that can rewrite rules or manipulate prices afterwards are essentially still centralized products.
DeFi oracles should be a sacred presence guarded by a network of validators, rather than tools whimsically manipulated by pseudo-DeFi teams during crises. Such events only exacerbate public doubts, making it harder for truly principled builders to gain trust. If DeFi continues to be misrepresented, it will ultimately become a hollow slogan of self-promotion.
Mass adoption requires the return of user sovereignty.
This is precisely the deep logic behind DeFi's need to return to its P2P roots. In a modernized P2P system, users can autonomously agree on fixed terms, choose collateral assets, and free themselves from fragile oracle pricing, achieving true transparency and resilience. Whether it’s asset selection, direct lending, or non-intermediated transactions, every DeFi user deserves an open, secure, user-led system—only by rebuilding control and transparency can true mass adoption be achieved.
This model will attract both crypto-native users and newcomers. Fortunately, despite market fluctuations, the demand for DeFi has never waned: the veteran protocol Aave has surpassed $40 billion in locked value at its historical peak, and Uniswap has become the first DEX to reach a cumulative trading volume of $30 trillion. These are not signs of industry decline; rather, they prove that the market is maturing under pressure.
To achieve lasting global adoption, DeFi needs better product offerings. The future lies not in more complex mechanisms but in returning to the inherent qualities of P2P—simplicity, flexibility, and respect for individual sovereignty.
Author: Jean Rausis, Co-founder of SmarDex
This article is for informational reference only and does not constitute legal or investment advice. The views expressed are solely those of the author and do not reflect the position of Cointelegraph.
