How DeFi is Transforming Traditional Finance

Decentralized finance (DeFi) and traditional financial systems (TradFi) perform similar basic functions: asset exchange, lending, and capital management. However, the key difference lies in how transactions are processed and data is managed.

In the traditional financial system, control over transactions is concentrated in the hands of central organizations — banks or exchanges. These institutions play a central role: maintaining internal ledgers and managing data by modifying, canceling, or blocking transactions. Access to services is regulated by user identification rules (KYC), limiting opportunities for anonymous and decentralized operations.

In DeFi, by contrast, distributed blockchain technology is used. The ledger is maintained by multiple nodes, rather than a single central organization. All blockchain transactions are immutable and secured by smart contracts, eliminating the possibility of data alteration or interference. Smart contracts automatically enforce transaction terms.

For most of society, the impact of decentralized finance is not yet noticeable. But progress is ongoing.

1. Faster and Cheaper Transactions
   DeFi eliminates the need for intermediaries by automating processes. Transactions that might take days in a traditional system are completed almost instantly in decentralized finance. Moreover, the absence of intermediaries reduces financial costs.
2. Increased Financial Accessibility
   Anyone can access DeFi, even those excluded from TradFi due to a lack of a bank account or credit history. Decentralized systems utilize alternative data such as digital footprints and transaction histories.
3. Development of New Markets, Products, and Opportunities
   DeFi continues to advance asset tokenization — creating digital equivalents of real-world assets like stocks, bonds, and real estate. This expands market liquidity and attracts investors with smaller capital. New products in the space — such as decentralized exchanges (DEX) and risk management platforms — offer additional opportunities for investment and diversification.
4. Transparency and Trust
   The decentralized finance system is built on public blockchains where all transactions are transparent and verifiable. This reduces the risks of fraud and corruption. While TradFi keeps transaction data private, DeFi ensures complete visibility, which will impact the overall development of the economy.
5. Integration with Larger Systems
   Projects like DBS and Onyx by J.P. Morgan already demonstrate how DeFi can integrate into established economic structures while maintaining transparency and security.

Decentralized finance will continue to evolve. Below are trends, according to experts, showing how DeFi is changing finance:

• Bitcoin as a Strategic Reserve Asset: The U.S. is likely to begin considering Bitcoin as a strategic reserve asset. This will be a major step toward recognizing cryptocurrencies as part of the global economic system. The result: increased interest in crypto assets from other nations and new market dynamics.
• Growth of the RWA Market: The real-world assets (RWA) market is expected to grow, reaching a capitalization of $30 trillion over the next decade. This will attract more institutional investors and strengthen the connection between traditional and decentralized finance.
• Seamless Platform Interoperability: The boundaries between Web2 and Web3 will disappear. By 2025, significant integration of DeFi into TradFi can be expected.
• Stablecoins for Cross-Border Transactions: Stablecoins will be actively used for cross-border transfers and integrating cryptocurrencies into everyday payment services.

DeFi is not just an alternative to TradFi — it’s its inevitable evolution. While challenges like regulation and scalability remain on the path to mass adoption, the potential is already clear. As industry leaders note, the future of finance is not about choosing between centralized and decentralized systems — it’s about their synergy.