Opinion by: Mark Jones, founder of Hana Wallet
The early 1970s saw the first emails exchanged between US college professors aiming to share files and collaborate. Initially, these emails were sent via a closed system connecting two computers on the ARPANET, utilizing the File Transfer Protocol.
This method was slow, complicated, and cumbersome, limiting its use to Ivy League universities and government research facilities.
Web browsing only became mainstream with the introduction of the Hypertext Transfer Protocol (HTTP), which addressed usability issues.
Today’s DeFi protocols echo their Web2 counterparts, being intricate and defended by fervent advocates who oppose traditional financial services (TradFi). While the skepticism towards TradFi stems from failures leading to the 2008 crash, such rigidity hampers progress and the realization of DeFi’s full potential.
DeFi and TradFi together
If leaders from DeFi and TradFi choose collaboration, we might reflect on this moment as akin to the transformative period for 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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It may be hard to fathom, but a well-defined path exists involving traditional payment service providers (PSPs) that integrate crypto, allowing users to directly top up a Mastercard from on-chain liquidity. This hybrid model combines the efficiency and programmability of digital assets with the extensive reach of familiar payment networks, simplifying the use of crypto in everyday life. The focus should not be on choosing between TradFi and DeFi, but rather on merging both to create the user experience people desire.
Users can send their digital assets to a public key on their debit card, enabling them to utilize cryptocurrencies wherever they would typically use a Mastercard. While it may appear minimal, this connection between niche digital assets and mainstream financial providers offers a genuine chance to expand DeFi and provide financial access to billions who are unbanked or underserved by TradFi.
The use case focus is wrong
Over the past 16 years, a multi-trillion-dollar asset class has emerged from nothing, yet only a small fraction is utilized in the real economy. Most applications focus on remittances, with only a minor portion applied beyond cold storage or speculative trading. This limited utility stems from the closed systems born from mutual distrust between the DeFi community and TradFi, which obstruct popular cryptocurrencies from achieving their potential.
Bridging digital assets with TradFi eliminates previous barriers, allowing debit cards tied to digital assets to integrate with existing PSP infrastructure and unlock their true potential. Historically, past technological advancements have occurred in shorter periods when usability challenges were addressed. The future Web3 economy will necessitate overcoming data silos, walled gardens, and the distrust of prior vested interests.
By setting aside ideological differences, DeFi and TradFi stand to accomplish far more than is currently seen. Enhanced collaboration with existing infrastructure partners can accelerate the development of innovative payment products, improve the current framework, and scale operations more swiftly while reducing costs for billions of unbanked or underserved individuals.
It shouldn’t become a zero-sum game between opposing factions. Through cooperation and leveraging existing infrastructures, both sides can dismantle barriers and achieve greater mutual benefits.
For too long, crypto enthusiasts have crafted intricate systems within isolated environments in reaction to TradFi’s failures. These innovators have made significant advancements financially and technologically.
Now is the time to put aside differing ideologies that hinder mainstream acceptance.
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 Cointelegraph.
