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The world relies on consumer spending and consumer savings. It is ordinary people who really power the most important parts of the global economy and global financial system.
For consumers, the system runs through their retail banks. This is where most people save, spend and pay taxes. This is the battlefield of the upcoming battle: the battle for global consumer deposits.
There is no doubt that this will be the battle of the century. It will change the shape of the world more fundamentally than the Internet. The Internet is about information. DeFi is about capital-as we all know, money is power.
Today, most people either hate their banks or are indifferent to their banks. This may be because they will fine you for minor mistakes, make you call for a few hours, give you the worst interest rate you can imagine, and provide you with a user experience close to hostility.
This is not always the bank’s fault.Consumer supervision and control have reached a certain level comply with Usually one of the largest cost centers of all retail banks. Such institutions cannot innovate because they are established to resist change, not to accept it.
Irresistible opportunity
Decentralized finance subverts this model and provides a new world of financial products, built with smart contracts, allowing consumers to switch between suppliers in a few seconds with just a click of a mouse.
related: DeFi will bring a global revolution to the traditional financial sector
It’s not that the DeFi model is better-it’s just fundamentally different.In the old world of retail banking, we have to Believe in the people Operating a bank. This kind of trust is expensive.In the new world of decentralized finance, we Trust the code Provide our financial services.
Protocols such as Aave, Uniswap and MakerDAO have the ability to directly control assets such as USD Coin (USDC), ether (Ethereum) And Wrapped Bitcoin (wBTC) have promoted the rise of financial products, which can operate 24/7, 365 days a year, 100% normal operation and no employees are required. It eliminates the cost of checks and balances. It uses hand-made financial processes and turns them into automated procedures.
Decentralized finance It provides entrepreneurs with an irresistible opportunity to truly compete in the global financial world-this place was once the exclusive domain of multinational companies with an eight-figure legal team. Not only that, DeFi reduces consumer switching costs to almost zero: I can transfer my funds from Aave to Compound to Uniswap in a matter of minutes, and the paperwork is completely zero.
related: Possibility of DeFi: Why DeFi can rebuild trust in financial services
On DeFi, capital can flow to the most valuable opportunities almost immediately. It provides what global finance really needs: real competition and real innovation. This competition is why DeFi will kill retail banks. If I can get a 15% annual interest rate in my favorite DeFi savings decentralized application, why should I deposit the money in the bank?
Opportunity comes with threat
But now, DeFi is not doing well.So far, DeFi on Ethereum has ended $285 million hack, Rewards are unfairly shared, Ethereum continues Crowded and expensive to use.
The trust model of DeFi is code, not humans. The community is vital to the success of any ecosystem. To win, the platform must not be crowded-no matter how many people are using it.
related: Smart contract exploits are more ethical than hacking…or not?
We need a decentralized network that developers can build quickly without being constantly threatened by attacks and hacker attacks. Every improvement will be rewarded, and scale will never become a bottleneck. Because only in this way can retail banks be eliminated, and we can see what great consumer finance looks like.
This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.
The views, thoughts and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Pierce Ridyard He is the CEO of Radix DLT, a secure decentralized network. Piers also founded and exited YCombinator company Surematics, and in July 2015 mining on the genesis block of Ethereum. Piers graduated from the University of Manchester and the School of Law, with a CFA level 1.
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