Bridging The Gap Between Defi & TradFi

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21 May 2024

World’s Apart
TradFi is synonymous with exclusivity, excessive fee structuring, and poor service delivery. This was the initial argument for Bitcoin and XRP back in the day. A cross-border payment could be processed and finalized within seconds, in XRP’s case. Decentralized finance enables anyone to transact, regardless of the time, or day of the week. TradFi, on the other hand, is burdened with excessive and restrictive measures.
In 2020 we witnessed the birthing of DeFi, and with it, collateralized loans, yield farming, and other experimental products. Essentially, this breakthrough created opportunities for individuals previously excluded from financial products such as loans, and in some cases, even interest-bearing accounts. The DeFi sector has matured and is now more mainstream than in the previous cycle.
One of the disappointments of the previous cycle was the unhealthy leveraging of DeFi opportunities by CeFi players such as BlockFi and Celsius. These entities created CeFi products by utilizing DeFi protocols. The lines were often blurred, creating a deceptive illusion. This eventually led to the downfall of many of these entities. FTX triggered a domino effect, which was irreversible.
An Unhealthy Union
Celsius’s unhealthy and overleveraged approach to DeFi protocols ultimately led to its demise. Most lending services suffered some setbacks in 2022. Many of them were forced to cease operations. BetFury, also known for its lending services and online gaming, was completely unaffected. The entities perceived to be more reputable and solid are the ones that went down with the FTX ship.
Now that we have seen and experienced an unhealthy union between DeFi and TradFi, it’s time for a more effective amalgamation. After all, this was always going to be the case. The amalgamation of TradFi and DeFi is a scenario I have discussed over the years. It’s an inevitable end and is already beginning to unfold. What is imperative now is to identify the projects with the most viable models.
Projects that will experience significant adoption due to practicality and attractive use cases. Correctly identifying these projects early will aid in making smart investment decisions. These projects will likely experience ongoing adoption and enormous market cap growth over the coming years. Sometimes one can feel as if they missed the bus. However, we are still very early, regarding this technology.
A handful of projects will become increasingly significant within 5 to 10 years. A lot of projects will do well. However, a scenario where a few key players dominate is within the realm of possibilities. This is how I see it playing out, and I am looking to identify as many of these projects as early as possible. Speculation is at the heart of every investment decision, even the more risk-averse opportunities.

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Final Thoughts
TradFi and DeFi must soon agree on key “bridges” that will unite the two worlds, ultimately creating an attractive and enjoyable user experience. It’s amazing how important this particular aspect is regarding adoption. When you think about it, it’s a similar dynamic that encouraged the Solana boom. However, recent network issues have caused some frustrations for users.
DeFi remains an exciting sector and is an integral cog in the WEB3 machine. Expect to see more creativity and development coming out of this space. There is still a lot of room for innovation and adoption. Anyway, that’s it for this one. It’s great to see BTC above $70K again. Stay strong and I will see you next time!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.