Opinion by: Mark Jones, founder of Hana Wallet
It’s often forgotten that the first emails were sent between US college professors looking to share files and work collaboratively in the early 1970s. The sending of emails between two professors initially involved using a closed system between two computers on the ARPANET that would enable messages to be sent over the File Transfer Protocol.
The process was slow, complex, time-consuming and consequently didn’t gain any traction beyond Ivy League universities or government research facilities.
Web browsing entered the mainstream only when the Hypertext Transfer Protocol (HTTP) was created and the usability issue was addressed.
Current DeFi protocols are similar to their Web2 predecessors in that they are complex and guarded by zealots who philosophically oppose engaging with traditional financial services (TradFi). Although it’s not hard to see why crypto believers are critical of TradFi, given the failings that led to the crash of 2008, this intransigence is preventing progress and DeFi’s potential from being fulfilled.
DeFi and TradFi together
Should leaders in DeFi and TradFi decide to work together, we might look back at the current time as a similar inflection point to web browsing in the 1990s — when digital asset service providers broke down barriers between TradFi and DeFi platforms, enabling mainstream adoption.
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Hard though it may be to imagine, there’s already an established path that involves traditional payment service providers (PSPs) that integrate crypto and enable 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 synthesizing both to create the user experience people want and need.
People must send their digital assets to a public key on their debit card and then put their cryptocurrencies to use anywhere they usually 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’s a genuine opportunity to both grow DeFi and provide access to finance to the billions of people unbanked and underserved by TradFi.
The use case focus is wrong
Within the last 16 years, a multi-trillion-dollar asset class has been created from nothing; however, only a small percentage is used in the real economy. Even then, its use cases focus on remittances, with only a fraction applied beyond cold storage or speculation. This lack of utility is primarily due to the closed systems built out of mutual distrust between members of the DeFi community and TradFi that prevent popular cryptocurrencies from fulfilling their potential.
By connecting digital assets with TradFi, previous barriers that have prevented people from using their assets have been removed. Debit cards linked to digital assets can connect to the existing PSP rails and unleash their true potential. Although it may seem far off, previous technological jumps happened in shorter periods when usability issues were resolved. Data silos, walled gardens and unnecessary distrust of previous vested interests will need to be put aside in the future Web3 economy.
When discarding these ideological differences, DeFi and TradFi can achieve much more than is currently being done. With greater coordinated collaboration with existing infrastructure partners, service providers can speed up development of new products in the payment industry, improve existing architecture and scale faster while reducing costs for billions of people who were either unbanked or underserved.
It needn’t be a zero-sum game between opposing sides. Working together and using existing infrastructure, both sides can tear down barriers and achieve so much more to the mutual benefit of everyone.
For too long, the crypto evangelists have created complex systems within closed environments in response to the failures of TradFi. These pioneers have achieved great things financially and technologically.
It’s time to put aside the ideological differences that prevent mainstream adoption.
Opinion by: 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 here are the author’s alone and do not necessarily reflect or represent the views and opinions of Coinpectra.