It is very important to understand that Defi (Decentralized Finance) operates in an unregulated space. This gives rise to a lot of security and trust issues that deter new and non native audience from Defi Adoption. Some of the common problems are:

1. High Gas/Transaction Fees: Blockchains are yet to figure out how to control sustainable levels of transaction fees when the volume of the transactions on the blockchain increases. Ethereum. The average transaction cost on Ethereum has catapulted from less than $5 in 2020 to about $40 in February 2021. However, L2s (Layer 2 Blockchains) have helped address the issue. Constant Ethereum protocol updgrades have helped reduce the average cost per transaction (It is currently at ~$15). More on this here
2. Complex User Interface: The user interface of many Dapps (Decentralized Applications) has a lot of developer native lingo. This overwhelms the common user and disincentivizes them to use the dapp. Lack of intuitive design leads to problems like – Money being sent to the wrong address and lost forever
3. Duplicate Tokens: Since anyone can create a token with any name and symbol, there are multiple instances of different tokens having the same symbol. This is dangerous as users might end up buying the wrong token, leading to monetary losses. Hence, the owners promote the exact address (which is a complicated – a long string, adding friction to user experience) For example – BitMoney and BitRewards has the same Symbol BIT
4. Lack of formal Compliance: A lot of top public blockchains don’t conduct the KYC (This is a drawback for maintaining Anonymity and privacy). Further, this leads to money laundering. For example – There have been instances of impersonator apps and dapps that syphon your money. However, Blockchain foundations have been supportive and cooperative in helping regulators come up with standard AML measures
5. Lack of customer support: Since, anonymity is promoted, the dapps are unable to provide good customer support. Lack of KYC results in limited operational support or grievance redressal/protection mechanisms. One of the solutions for this could be to provide insurance for systemic events
6. Scams: There are multiple fraud and scams that run as defi projects, where they promise you unprecedented (Extremely High) annual yields. These are projects where the initial investors pump in the money and create hype around it. A lot of novice retail investors invest in the project and once the token reaches a certain exit level (10x or 20x growth), the initial investors exit and the token price massively drops. These are also called Rug-Pulls. (Basically pulling away the rug from underneath, leading to collapse of the value)
7. Mistakes in Smart contracts: Smart contracts apart from being simple codes are also stores of value, similar to bank accounts. A minor error in the code leads to loss of funds or incentive for a hacker to syphon the money. Thus it becomes extremely crucial for the smart contracts to be safe.

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References:

• Bitinfocharts
• Messari
• Hyfi Yellowpaper