Why Big Money is Shying Away from DeFi and What It Means for You

In the world of decentralized finance (DeFi), there's a big issue called maximal extractable value (MEV). It's when miners or validators reorder transactions to make extra profits. This is a problem for everyone, especially big financial institutions, because they don't want to risk their trades being manipulated before they even happen. One expert points out that all electronic markets deal with similar problems. The main issue is that transaction details are visible to everyone before they are executed. This lack of privacy is a major roadblock for big players in the financial world. They don't want to take the risk of their trading intentions being known before the trade is done. To fix this, some suggest using trusted execution environments. These are like private vaults that handle transactions secretly. Orders are encrypted and only decrypted when they are ready to be executed. This way, no one can see the trading intentions beforehand, making it impossible for others to manipulate the market. This is a big deal because it protects users from things like sandwich attacks. That's when someone places transactions just before and after yours to manipulate the price and make a profit at your expense. The debate around MEV is heating up in the crypto world. Some worry that it could lead to more centralization, higher costs, and slower adoption of DeFi. But why should you care? Well, when big institutions stay away from DeFi, it hurts everyone, especially regular users like you. These institutions are like the highways and roads of the financial world. They provide the infrastructure that keeps markets running smoothly. Without them, markets can become less liquid, more volatile, and more prone to manipulation. This can lead to higher transaction costs and fewer trading opportunities. In short, it's a lose-lose situation for everyone involved.