Can DeFi Have an Impact on Wall Street?


  • Understanding DeFi
  • Understanding Wall Street
  • DeFi vs. Traditional Methods

The bigger question that arises here is, if Wall Street could be put out of business by DeFi?

Understanding DeFi

DeFi or Decentralized Finance is a global financial system, which provides effective financial management and visibility. It allows users to explore global markets and offers currencies and banking possibilities that are not available for a person in their country.   

DeFi programs have already handled billions of dollars in Bitcoin and this figure is increasing continuously. 

DeFi can be used by various cryptocurrencies holders to earn interest by lending their money or by staking their cryptocurrency. In DeFi a lender is likely to get higher returns than that in banks, so it slowly becoming a more attractive alternative for investors than Wall Street. 

Understanding Wall Street

‘Wall Street’ is the name used to describe large brokerage firms that have ruled over the US investment business at one time. 

Since 2008, when the distinction between commercial banks and investments got weakened, Wall Street became the name for all the parties involved in investment and financial activities in the US. 

Being operational in the largest financial market, Wall Street has a great impact on the world economy.       

DeFi vs. Traditional Methods

Software economics are enabled by DeFi for financial services, which is not possible in traditional banks. 

No marginal cost for each extra user in DeFi because of software economics.

Banks cannot afford this because of the compliance expenses, paperwork, manual processes, and other factors. Whereas, smart contracts that are financial services are stored on the financial cloud and last forever, creating non-issues for DeFi protocols. 

Ways in Which Wall Street Could Be put out of Business by DeFi

Thanks to the effective usage of proof-of-work consensus mechanism and cryptography, blockchain was able to achieve true immutability. On the blockchain it is impossible to tamper or modify any data once approved, making it completely secure. 

Apart from the advantages of decentralization, immutability offers a potential assurance of security. The immutability features of the blockchain ensure that the integrity of DeFi systems is well protected when executing financial transactions.

Another important feature of DeFi is Transparency. The cryptographic feature of blockchain ensures that once the data has been verified, it only gets recorded. 

In the loan and borrowing process, DeFi provides a more efficient and straightforward verification process. 

Despite recent instability and a significant pullback, DeFi has accelerated its expansion. DeFi-based transaction banking bolsters the current trend of atomized services and financial management that depends on technology, workflow management, and risk arbitrage for-credit opportunities. DeFi brings two crucial aspects to these developments: permissionless access and a stronger emphasis on interoperability.   

A large number of traders have been laid off as a result of money loss. Seeing this it seems to be clear that the cost structure of DeFi may surpass that of Wall Street.     

Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing. 

Photo by – geralt on Pixabay