Can DeFi apps outperform banks within crypto?

Anyone who has been paying attention to crypto and regulatory developments towards the industry over the past 5-6 months would understand that things are getting really intense.

We are about to witness one of the fastest growing industries earn its place in global economies over the next 5-10 years in so many different ways.

A lot of people echo this sentiment as broad predictions have been made toward various developments. A particularly recent prediction on the stablecoin market expects trillions to flaw into stablecoins as The U.S. Senate passed the Genius Act bill by a bipartisan vote of 68–30.

The passage of the landmark Genius Act in the U.S. Senate has signaled a major shift in crypto regulation. According to industry experts, the change it could bring is hard to overstate. Stablecoins are on track to become part of a core trillion-dollar industry and transform everyday life for consumers.

Ira Auerbach, Head of Tandem at Offchain Labs, believes this regulatory clarity removes a major roadblock for adoption.

“As stablecoins begin to surge towards Citibank’s projected $1.6 trillion market by 2030, the game-changing infrastructure won’t just be the stablecoins themselves—it will be the payment financing layer that transforms them into powerful tools for global commerce,” Erbil Karaman, co-founder of Huma Finance, seperately stated. — Crypto.news reports

The burning question now is if institutional adoption will suppress native DeFi solutions. When we look at the banks for instance, this is an industry we've widely discussed to be threatened by crypto innovations and as recent developments proves a growing interest in tokenized assets from traditional banks, some might worry what will become of the industry given that these institutions hold significant capital influence.

DeFi protocols Vs Traditional Banks

I think the conclusion that traditional banks and its capital influence would take over and centrally dominate crypto is too much of a convenient conclusion to make.

There are primarily two truths with recent developments:

— The banks are ready to make adjustments and adopt crypto tech.

— DeFi is still the ultimate winner.

Surely, the banks will stick to wanting control even in crypto, this is something I touched on in a recent article following a report on JPMorgan’s deposit tokens considered to be superior to stablecoins.

However, this very much will be a major reason why DeFi will win ultimately. The only way the banks were going to lose fast was if they were anti-crypto, but evident adjustments would make the process much slower.

This means that initially, these financial institutions will hold significant influence given the users funds and assets they have to work with. That said, DeFi, despite crypto’s volatility, hacks and scams, continues to grow and that shows great promise of where things are headed.

At the end of the day, DeFi protocols and traditional banks have different business models and this distinction will play a crucial role in the ultimate winners, long term.

The bank's thirst for control necessitates rigidity, whilst, on the other hand, DeFi aims to give individuals control, flexibility and freedom and that will make it the long term winning industry.

It's much easier to come to this conclusion when we first consider where crypto adoption is much higher. What are these users searching for exactly?

Certainly not centralized systems that will only screw them over at the end of the day. The banks will definitely have a great run for some time, but DeFi, which already has several billions in TVL, will grow consistently to outperform the banks in both assets held in protocol contracts and volumes.

Posted Using INLEO