According to a recent research report from Bank of America (BAC), the correction in the digital asset markets last year has caused a shift from speculative trading to projects with actual functionality.

However, BAC says that the current functionality of decentralized finance (DeFi) “barely scratches the surface.” The report states that regulatory barriers, poor user interfaces, and limited functionality are hindering the widespread adoption of DeFi.

The bank sees platforms like Gauntlet as driving the evolution of DeFi applications, but acknowledges that these obstacles must be addressed in order for DeFi to reach its full potential.

The report highlights the need for the development of soulbound tokens or non-transferable identity and reputation NFTs to expand DeFi’s functionality.

The majority of existing DeFi applications are relatively new and still in their early stages of development, but BAC believes that these applications will mature over time and drive adoption and usage, leading to increased revenues and native token appreciation.

In the long term, BAC predicts that the development of DeFi applications with real-world functionality will improve the efficiency of traditional financial products and services.

The bank anticipates that these applications will continue to evolve by balancing user incentives and risks. BAC says that while the majority of DeFi applications are currently immature, we are in the early stages of a major change that could take place over the next 30 years.