Despite these barriers to entry, a prominent investor believes it is only a matter of time before DeFi “eats” finance.
Investor explains why DeFi will “eat” traditional finance
DeFi threatens traditional finance due to the benefits of accessibility and liquidity, “active” DeFi investor and Ethereum proponent Arthur Cheong wrote in a recent edition of Camilla Russo’s The Defiant newsletter/publication.
Cheong explained that with the introduction of trustless and permissionless systems with Bitcoin and its derivatives, DeFi immediately one-ups traditional banks because it “can provide universal access to financial services.” This industry, as a result, can and will provide “much better products and services at scale than traditional finance,” he added.
He illustrated this assertion with the image below, showing the supply of stablecoins on the Ethereum blockchain. Due to the recent U.S. dollar shortage, demand for “blockchain dollars” have gone parabolic, with assets like USDT somewhat filling the holes in global demand for dollars.
Notably, there is no hard evidence to confirm that the real-world dollar shortage is causing demand for blockchain dollars to spike, but the timelines do match up.
The investor added that with the (relatively) high-interest rates offered by applications like Aave and Compound,
“4 million Dai was just minted with WBTC in a single transaction. This really showcases the latent demand for non-ETH assets, and it’s the beginning of a broader trend of DeFi acting as an economic vacuum that will eventually attract almost all value to the Ethereum blockchain.”
Luke has had a long interest in financial technology, especially cryptocurrency and blockchain. With a Bachelors degree in Journalism and Media, Luke is dedicating his writing skills for the digital currency sphere.He can be contacted at firstname.lastname@example.org