The Advantages of DeFi Over Traditional Finance and Why Business Owners Should Take Notice

There are two philosophically differing banking systems in the world today—traditional finance (TradFi), consisting of the major banks, credit unions, and national financial systems, and decentralized finance (DeFi), consisting of decentralized exchanges, DApps, and other institutions lacking middlemen. While both systems are widely used, DeFi is gaining steam every day.

DeFi Addresses the Biggest Issues in Traditional Finance

DeFi was established to address the biggest issues inherent in traditional finance, such as high fees, failures, and lack of transparency. While Bitcoin was the first peer-to-peer electronic cash system, it was the launch of Ethereum in 2015 that made decentralized apps and DeFi possible by enabling smart contracts. Decentralized exchanges, DApps, and other DeFi institutions lacking middlemen now offer financial services in a radically different way than how traditional finance institutions offer them.

The Advantages and Disadvantages of DeFi Compared to Traditional Finance

While DeFi still lags behind traditional finance in terms of market share and available services, it has several advantages over traditional finance. DeFi platforms are permissionless, allowing anyone with an internet connection to access and use their services. In DeFi, anonymity is often possible, the customer holds their own money, and transactions occur between connected people without a middleman, often leading to faster transaction times and lower fees. DeFi is also trustless, meaning that users require a much lower level of trust compared to traditional banks.

However, DeFi still faces several challenges, such as complex user experience, vulnerability to manipulation and exploitation by bad actors, and scalability limitations of the Ethereum blockchain.

DeFi's Potential to Outperform Traditional Finance: Why Financial Advisors Should Take Notice

While traditional finance has existed for centuries and will never completely go away, DeFi's rise presents a compelling alternative that financial advisors should take notice of. Wealth managers need to start planning for DeFi now and incorporate it into client portfolios to benefit from more transparent, lower-cost banking options, better yields, and stronger protection from external forces like interest rate increases and poor management decisions. By partnering with a reputable PR firm like Profit Growth Builders and the Authority Boost Public Relations Campaign, DeFi companies can effectively showcase their innovations, partnerships, and achievements to a wider audience, including potential investors and partners.