DeFi And TradFi Must Put Aside Their Differences

Opinion of: Mark Jones, founder of Hana Wallet

It is often forgotten that the first emails were sent between US university professors trying to share files and work collaboratively in the early 1970s. Sending emails between two professors initially involved a closed system between two computers on the ARPANET that would allow messages to be sent over the File Transfer Protocol.

The process was slow, complex, time-consuming and therefore did not gain any traction beyond the Ivy League universities or government research facilities.

Web browsing entered the mainstream only when the Hypertext Transfer Protocol (HTTP) was created and the usability problem was addressed.

Current DeFi protocols are similar to their Web2 predecessors in that they are complex and guarded by zealots who are philosophically opposed to engaging with traditional financial services (TradFi). Although it’s not hard to see why crypto believers are critical of TradFi, given the failures that led to the 2008 crash, this intransigence prevents DeFi’s progress and potential from being fulfilled.

DeFi and TradFi together

Must leaders in DeFi and TradFi decide to work together, We can look at the current time as a turning point similar to web browsing in the 1990s – when digital asset service providers broke down the barriers between TradFi and DeFi platforms, enabling mainstream adoption.

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Although it can be imagined, there is already an established path that involves traditional payment service providers (PSP) that integrate crypto and allow users to top up a Mastercard directly from onchain liquidity. This hybrid approach combines the efficiency and programmability of digital assets with the global reach of familiar payment networks, making it easier than ever to use crypto in real life. It’s not about choosing TradFi or DeFi, it’s about it synthesizes both to create the user experience that people want and need.

People have to send their digital assets to a public key on their debit card and then put their cryptocurrencies to use anywhere they normally would with a Mastercard. It might not sound like much, and in many ways it isn’t. However, by bridging the gap between relatively niche digital assets and mainstream financial service providers, there is a real opportunity to grow DeFi and provide access to finance to the billions of unbanked and underserved people through TradFi.

The focus of the use case is wrong

Over the past 16 years, a multi-trillion dollar asset class has been created out of nothing; however, only a small percentage is used in the real economy. Even then, their use cases are focused remittanceswith only a fraction applied beyond cold storage or speculation. This lack of utility is mainly due to the closed systems built by the mutual distrust between DeFi and TradFi community members that prevent popular cryptocurrencies from fulfilling their potential.

By connecting digital assets with TradFi, previous barriers that prevented people from using their assets have been removed. Debit cards linked to digital assets can connect to existing PSP rails and unlock their true potential. Although it may seem far-fetched, previous technological leaps occurred in shorter periods when usability problems were solved. Data silos, walled gardens and unnecessary distrust of previous vested interests must be set aside in the future Web3 economy.

When you remove these ideological differences, DeFi and TradFi can achieve much more than what is currently being done. With greater coordinated collaboration with existing infrastructure partners, service providers can accelerate the development of new products in the payments industry, improve existing architecture and scale faster while reducing costs for billions of people who were either unbanked or underserved.

It should not be a zero-sum game between opposing sides. By working together and using existing infrastructure, both sides can break down barriers and achieve much more to everyone’s mutual benefit.

For too long, crypto evangelists have created complex systems in closed environments in response to TradFi’s failures. These pioneers achieved great things financially and technologically.

It is time to put aside the ideological differences that prevent mainstream adoption.

Opinion of: Mark Jones, founder of Hana Wallet.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.