Perspective by: Mark Jones, founder of Hana Wallet
It’s often overlooked that the initial emails were exchanged between US college professors aiming to collaborate and share files in the early 1970s. This email exchange involved a closed system linking two computers on the ARPANET that allowed messages to be transmitted via the File Transfer Protocol.
The process was slow, intricate, and labor-intensive, resulting in minimal traction outside Ivy League universities and governmental research institutions.
Web browsing became mainstream only after the creation of the Hypertext Transfer Protocol (HTTP), which addressed usability challenges.
Modern DeFi protocols mirror their Web2 counterparts in their complexity and are often defended by enthusiasts who ideologically resist engagement with traditional financial systems (TradFi). While it’s understandable why crypto advocates critique TradFi, particularly after the 2008 financial crisis, this obstinacy hinders the progress and potential of DeFi.
Bridging DeFi and TradFi
If leaders from both DeFi and TradFi opted for collaboration, we could reflect on this era as a pivotal moment akin to the evolution of web browsing in the 1990s — when digital asset service providers dismantled barriers between TradFi and DeFi platforms, paving the way for mainstream acceptance.
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Although it may seem improbable, there’s an existing route that involves traditional payment service providers (PSPs) integrating crypto, allowing users to add funds to a Mastercard directly from on-chain liquidity. This hybrid model marries the efficiency and programmability of digital assets with the global reach of familiar payment networks, facilitating real-life crypto usage. The focus should be on merging TradFi and DeFi to create the desired user experience.
Users need to send their digital assets to a public key on their debit card, allowing them to utilize cryptocurrencies wherever they typically shop with a Mastercard. While this may seem minor, it represents a significant step toward bridging the divide between niche digital assets and mainstream financial services, presenting a genuine opportunity to expand DeFi and provide financial access to billions unbanked or underserved by TradFi.
Misdirected Use Cases
In the last 16 years, a multi-trillion-dollar asset class has emerged, yet only a small fraction is utilized in the real economy. Most applications focus on remittances, with minimal use outside cold storage or speculation. This limited utility mainly stems from the closed systems born of mutual distrust between the DeFi and TradFi communities, hindering popular cryptocurrencies from realizing their full potential.
By linking digital assets with TradFi, previous hurdles preventing asset utilization have been eliminated. Debit cards associated with digital assets can connect to current PSP networks, unlocking their full potential. Although it may seem distant, prior technological advancements occurred in shorter spans once usability issues were tackled. Future Web3 economies must overcome data silos, walled gardens, and unnecessary distrust of established interests.
By setting aside these ideological divisions, DeFi and TradFi can achieve far more than is being accomplished today. With enhanced collaboration among existing infrastructure partners, service providers can expedite the development of new payment products, enhance current architecture, and scale faster while reducing costs for billions of unbanked or underserved individuals.
This doesn’t need to be a zero-sum scenario. By working together and leveraging existing infrastructure, both sides can dismantle barriers and achieve significantly more, benefitting all involved.
For too long, crypto advocates have constructed intricate systems within isolated environments in response to TradFi failures. These innovators have accomplished remarkable feats, both financially and technologically.
It’s time to set aside the ideological differences that hinder widespread adoption.
Perspective by: Mark Jones, founder of Hana Wallet.
This article is for general informational purposes and does not constitute legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.
