Key points of Paradigm DeFi Survey Report: DeFi is not only an alternative option, but also the future of finance

Author: Paradigm Policy Team

Compiled by: Deep Tide TechFlow

We conducted a survey of 300 traditional finance (TradFi) practitioners covering multiple institutions, positions and regions. The results are almost consistent: the current financial system has hindered economic growth and resulted in wasted resources due to inefficient operation. The problem is urgent and the cost of action is higher. Many people see decentralized finance (DeFi) as a solution—a way to reduce redundancy and unlock real value. Our survey report clearly states that DeFi is not only an alternative option, it is the future development direction of traditional finance, and all this needs to start with policies that support its development.

The full report can be accessed here.

Discover 1: More than two-thirds of traditional financial companies are

paying attention to DeFi

The existing technology infrastructure and systems used by traditional finance are labor-intensive and require a lot of manual operation. Therefore, many TradFi companies have begun to explore cutting-edge technologies and actively look for ways to reduce costs, improve risk management and improve operational efficiency through technology. Cryptotech is increasingly integrated into its strategy:

• TradFi sees DeFi as the key to solving operational efficiency problems.

• Nearly 90% of companies are investing in or researching how to take advantage of public blockchains.

Traditional finance is actively embracing self-subversion because they know the huge benefits of turning to DeFi-powered infrastructure.

Discovery 2: DeFi will become an important part of traditional financial

core business

The data clearly show that TradFi believes that DeFi will ultimately play a crucial role in its core products and business lines. This view stems from belief that DeFi can improve the financial system.

From initial doubts to current acceptance, TradFi no longer believes that DeFi is limited to the cryptosphere, but regards it as an inevitable trend and a huge opportunity.

Discovery 3: Traditional Finance Refuses to Treat Private Blockchain as a

Substitute for Public Licenseless Blockchain

Last year, we released research showing that central banks are gradually abandoning proprietary blockchains and focusing on open source software and public networks. The survey further shows that most TradFi communities believe that public and unauthorized blockchains are crucial to the application of technologies such as smart contracts and asset tokenization.

Therefore, it is crucial to protect these systems and provide strong incentives for the development and maintenance of open public infrastructure.

Discovery 4: Stablecoins, asset tokenization and decentralized exchanges

(DEXs) are the focus of TradFi

Stablecoins, asset tokenization and decentralized exchanges are the areas of interest for TradFi at present, which is consistent with the growth trend of on-chain trading volume in these areas.

These three "pillars" are necessary to accelerate market development, because they provide: (1) settlement assets; (2) general asset representation; (3) composable protocols for on-chain financial transactions.

We expect growth in these areas to continue to climb in the coming years.

Discovery 5: The regulatory environment is the biggest resistance to

defiring economic efficiency in the short term, and policy makers are facing a generational opportunity to accelerate change.

Traditional finance (TradFi) has recognized that the development of decentralized finance (DeFi) is inevitable and it is a significant improvement compared to many existing financial systems. At this point, traditional finance and crypto industry have a largely consistent viewpoint, which has been working to protect DeFi’s open system to ensure that this innovation is not stifled until it fully matures. However, the main obstacle to traditional finance’s full embrace of encryption technology is not the inadequacy of infrastructure or the lack of practicality, but the limitations of many banks and market regulators. These regulators have slowed down this convergence by preventing traditional financial companies, banks, exchanges and funds from entering the DeFi sector.

Now, the era of cautious waiting and watching is over. Four years after the "Summer of DeFi", we have experienced a series of global market events and crypto market turmoil, which prove the "anti-fragility" of DeFi. It is time for regulators to open the floodgates between traditional finance and DeFi, allowing traditional financial institutions to embrace the possibility of this revolutionary technology.