Decentralized finance (DeFi) is moving from being a small niche within the finance industry to something that traditional finance (TradFi) is trying to incorporate.
In an interview with Cointelegraph at the World Economic Forum (WEF) in Davos, Switzerland, Emin Gun Sirer, Co-Founder and CEO of Ava Labs, discussed the role of DeFi in TradFi ecosystems and what users can expect in a future in which both occupy a central place.
Sirer stressed that the purpose of DeFi is not to attack or be an enemy of TradFi, but rather to complement it, at least in the beginning.
“I don’t think DeFi is meant to attack TradFi. DeFi is supposed to complement TradFi, at least initially,” argues @avalabsofficial‘s @el33th4xor when asked by Cointelegraph’s reporter @gazza_jenks at the @wef in Davos.
Do you agree about his thoughts on DeFi’s purpose? #CTWEF23 pic.twitter.com/BH2VPV2po2
— Cointelegraph (@Cointelegraph) January 17, 2023
“I don’t think DeFi is meant to attack TradFi. DeFi is supposed to complement TradFi, at least initially,” argues @el33th4xor of @avalabsofficial when asked by Cointelegraph reporter @gazza_jenks at @wef in Davos.
Do you agree with his thoughts on the purpose of DeFi?
The Ava Labs co-founder highlighted that DeFi could offer services to people that TradFi does not, especially when it comes to democratized access to financial platforms and services.
Sirer believes that the two will come together. However, this is a developing mindset in the DeFi space, as the first generation DeFi systems presented an alternative to TradFi.
According to Sirer, this is because these two financial worlds initially held different values, which are now merging.
“Now TradFi is understanding that, yes, [DeFi] It has the transparency that we clamor for, [ellos] they can do security testing on their systems because of the auditability of the systems they built, which we can’t do.”
A recent statement from a Ripple executive also revealed an expectant attitude towards further adoption of TradFi in 2023. This is also something that industry insiders are looking at in terms of acquisitions of cryptocurrency companies by larger and legacy companies in the TradFi space.
From a DeFi point of view, Sirer says that the visionaries will be the chains that absorb this growth.
Despite rosy forecasts of a DeFi-TradFi merger, the space has had a turbulent year. DeFi projects recorded the highest number of attacks and exploits in 2022, with more expected in 2023.
Following the FTX scandal, many outside the industry became increasingly skeptical about what decentralized finance technologies could offer.
Sirer says that, after FTX, it is necessary to remind everyone that this sector is here to stay, as well as this new asset class.
“Many of us have dedicated our careers to scientific development in the blockchain space. We took all the necessary steps to resolve the scalability issues to resolve the governance issues, the compliance issues that the space was facing.”
DeFi is even reinventing itself through an institutional lens to benefit the largest corporations in major industries, including TradFi banks.
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