Even so, its really up to the end user, the developer, and the borrower or lender to really assess the stability and riskiness of the smart contract, says Reid Cuming, Compounds vice president and general manager. I think were still in a state where theres a lot of room for improvement here.

Anyone who knows your wallet address can see how much you borrowed.

DeFi platforms also provide little privacy to borrowers, meaning anyone who knows your wallet address can see how much you borrowed and when.

Crypto skeptic Molly White says this divides users into three camps: people who protect their privacy at the expense of being able to use the major crypto platforms, people who give up some privacy to use them, and people whose identities and crypto wallets are publicly linked.

As the choice of platforms comes down to liquidity versus privacy, many of the purported benefits of decentralizationprivacy, anonymity, and independence from corporationsno longer apply. And managing these risks requires technical expertise that most borrowers simply dont have.

On one hand, White says, some believe these platforms are making financial transactions, once the domain of experts, available to anyonebut on the other hand, people are getting sucked into making risky decisions that they dont have the knowledge to be able to make responsibly.

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Kim remains optimistic. He compares the situation to the early days of the internet and says that even with the risks, DeFi has the potential to go mainstream. I think DeFi will meet parity with centralized finance just because of the transparency and openness of it, he says. The ecosystem does have to mature, but I think thats the case with any emerging technology.

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The risks and rewards of paying off student debt on the blockchain - MIT Technology Review