We all know how DeFi has been rapidly emerged to be a major disruptor to traditional finance, enabling us to use traditional financial services without the need for intermediaries like banks and has also opened up new opportunities for alternative asset investments.
Some key facts:
From art to commodities and collectibles, DeFi makes it possible for users to tokenize and trade alternative assets in a more accessible and transparent manner. DeFi has even helped with the tokenization of real estate assets and we see platforms like Landshare and RealIT turning real-world properties into asset-backed, yield bearing, and fully tradeable tokens.
DeFi’s smart contract technology provides added security and transparency in asset ownership and management, eliminating the need for traditional intermediaries making it a win-win for both investors and asset owners.
Seeing the current rate of growth and evolution of DeFi, could it completely replace the need for traditional finance in the future? Or do you think there are some features/advantages to traditional finance that DeFi won’t be able to compete with?
12 thoughts on “Can the rise of DeFi and alternative asset investments replace traditional finance?”
Hope really that DeFi can reach this level in the world, replace the standard things, but unfortunately I think the government won’t allow this
DeFi is still way too unfriendly to replace traditional finance. But I believe this will be possible in a near future.
You know we are pumping when these posts are back (no hate intended)
I think a world where DeFi succeeds is one where it lives alongside TradFi.
The traditional system is very fragile and on the brink of collapse, but it’s always been that way because it allows for growth and individuals to become very wealthy.
When that system has its faults we will have protocols to fallback on that are fully reserved and automated. They might not allow us massive room for growth but will at the very least provide us a utility.
Trad finance gives that sense of security and ease of use that anyone can handle. DiDs like Polygon ID and Ore ID have already come up with solutions that can simplify DeFi for anyone to use. For reliability, DeFi has a long way to go.
DeFi and alternative asset investments have the potential to disrupt traditional finance by offering more accessible, transparent, and efficient financial services. However, it is unlikely to completely replace traditional finance in the near future due to the early stage of development and adoption, regulatory and compliance challenges, and the role of traditional finance in providing financial services to underserved communities and supporting economic growth. Both systems are likely to coexist and evolve together.
For example, Oasis Network is actively developing DeFi solutions that address the challenges of traditional finance and the limitations of existing blockchain platforms.
It’s no secret that DeFi has revolutionized the way we interact with financial services. The ability to tokenize and trade alternative assets in a transparent and accessible manner is just one example of how DeFi is breaking down barriers and creating new opportunities for investment. Oasis Network, with its focus on privacy and security, is playing a key role in this DeFi revolution.
Not with the current options. Eth contracts are constantly getting exploited https://rekt.news/euler-rekt/
I think we will see other l1’s shine that are built to be more secure from the start.
DeFi surely has a lot of potential. Imo it won’t fully replace TradFi, but it will definitely become more complementary. There are possibilities of connecting CreditCards with Stablecoins and payments are directly possible and deducted from the blockchain wallet balance. While DeFi grows it could gain more marketshare from banks and TradFi. The more DeFi suppliers and options there are, the harder it is for regulators to shut it all down. This leads to a bigger growing parallel economy, that is potentially safer, more decentralized and backed by collateralized assets. Governments and banks won’t like it, but technology allows it and governments always one step behind.
And even if governments try to crackdown, there are many P2P options that bypass governments or there are nation states that want to escape the hegemony of the EU and USD. So they are very open and welcome to Bitcoin and other crypto (e.g. El Salvador). In the end those countries while thrive, while the nations relying on USD keep pulling themselves down with inflation, printing, debt, etc. etc.
A decentralized economy needs decentralized money. In the next 1-2 years we will definitely see this growing at a fast pace.
IMO the nascent industry we see today will diverge into a KYC’d and probably not permissionless side that integrates with the existing financial system, and essentially a worldwide anonymous shadow banking system that exists as its own entity outside of state control (basically what the whole thing is right now.)
I also have a growing suspicion that all capital will eventually flow to the latter to escape taxation, that this will drain resources from governments and possibly bring down the Westphalian state system altogether, and usher in a new dark age where no government has any mechanism to constrain the autonomy of a new class of techno-feudalist aristocrats. Kinda like the western hemisphere in the 17th century, only the entire world this time.
Its not impossible but a lot has to be in place, access to blockchain tech needs to get easier preferably via wallet creation using web2 identities, security and privacy also needs to be Top notch to encourage adoption.
It will not entirely replace traditional finance. Its use may only increase in the future. Just like we are also seeing in the tech industry, using Cartesi as example, where traditional coding languages are being integrated into blockchain to build apps. Both DeFi and tradition finance will co-exist and serve the people.