DeFi is offering a fresh wave of decentralized financial services and products to users around the globe. It is the hottest niche in crypto, but it is yet to leap its biggest hurdle and make the sector accessible for the general public. For that to happen and for mainstream adoption to occur, DeFi may need a helping hand from the fintech sector.
The DeFi boom
Statistical analysis shows that DeFi and cryptocurrency are growing strongly. Several dozen projects are competing in various segments, including lending, derivatives, payment solutions, decentralized trading and insurance. With more than $11 billion in total value locked, the industry is awash with fresh capital and the liquidity that offers.
Cutting out the middlemen and centralized providers introduces new solutions. Anyone in the world is, in theory, capable of gaining access to DeFi solutions. Doing so currently requires owning cryptocurrency, but may very well transcend the industry in the coming years, to a point where the blockchain technology which underpins it becomes completely seamless.
An extension of fintech?
According to a Medium article, DeFi and fintech are closely linked. Financial technology has tried to break the stranglehold of banks and other service providers in the financial sector. Progress has been made, although one has to wonder if it is enough.
For the time being, there are still some aspects of finance that need to be ushered into the modern digital age. More than 1.6 billion humans remain unbanked. It may not necessarily be a matter of banking the unbanked, but rather unbanking the banked. Decentralized finance does not require banks or similar institutions, at least in its current form.
At the same time, one has to imagine what could be possible if fintech and DeFi came together in a meaningful way. Disrupting financial services will require a joint effort if they are to be successful. Services have been impacted in several ways, but the infrastructure remains largely the same. This is where DeFi comes into the picture, as it provides an entirely different infrastructure in the form of a blockchain.
Catering to the masses
Despite the innovative aspect fintech and DeFi may provide, neither industry has seen significant “adoption”, so to speak. Making it easier for the average person to explore this new era of financial products and services requires a different approach. Cracking this code has proven difficult, even for big companies such as TransferWise, Venmo, and many others. Fintech is currently estimated to be worth roughly $187 billion; a mere drop in the ocean compared to the $26.5 trillion attributed to the global financial sector.
One company attempting to alter that narrative and bring decentralized finance trends to the masses is PlasmaPay. PlasmaPay is striving to make DeFi easy, with free transactions, a network of applications, and native support for fiat currencies. It is this latter feature which could prove to be PlasmaPay’s killer app, onboarding ordinary users and providing greater numbers of people with a gateway into decentralized finance.
PlasmaPay is convinced they can build the services and infrastructure to make a lasting impact and become a force for DeFi’s greater good. So far, the company claims to service more than 160 countries and 100,000 users globally. A combination of mobile applications, corporate solutions, and blockchain technology is the vision to bridge the gap between current financial solutions and what may become the next generation.
The catalyst for true disruption
For years, blockchain evangelists have touted the potential of distributed ledger technology. While it can provide a new level of infrastructure, there is no ‘killer app” for it as of yet. Some may argue cryptocurrency is a clear “killer app”, but that too remains a niche market first and foremost. Bitcoin and other assets are widely regarded as speculative investment vehicles, rather than the next payment method to use for coffee.
The big question is whether decentralized finance can be the catalyst to highlight the potential of not just blockchain, but also cryptocurrencies. Whether it is an asset like Bitcoin, or a stablecoin pegged to an existing national currency, distributed ledger technology makes it possible. That alone may not be sufficient to be deemed “disruptive” in the long run, though.
Looking at what is currently possible with blockchain technology and cryptocurrency, there are some options worth mentioning. Exploring money markets through decentralized lending and borrowing, or even managing assets with automated trading strategies are just some options available right now. They are all in the early stages of development, and will need more refinement down the line.
In terms of integration, OKEx’s Earn feature lowers the barriers to entry. Holders of specific cryptocurrency assets can begin earning interest, like a traditional savings account, with very little effort. Funds can be withdrawn any time if the user decides to exert that option.
In the end, it will come down to how easy it is to access fintech and DeFi solutions, as well as their level of scaling. Blockchain technology has the potential to scale indefinitely, yet the top cryptocurrency ecosystems have reached their limits some time ago. This has become particularly apparent where Ethereum is concerned, as its network tends to congest due to the various DeFi solutions on the market.
Checking all of the right boxes will not happen overnight. So far, the building blocks are being laid to potentially achieve something in the years to come. Disrupting finance is an ongoing process. Rome wasn’t built in a day either.