Comment: Hana Wallet Founder Mark Jones
It’s often forgotten that the first emails were sent in the early 1970s between American university professors who wanted to share files and collaborate. Sending e-mail between the two professors originally involved using a closed system that allowed messages to be sent between two computers on the ARPANET via a file transfer protocol.
The process is slow, complex, and time-consuming, so it has failed to gain traction outside of Ivy League universities and government research facilities.
Web browsing became mainstream after Hypertext Transfer Protocol (HTTP) was created and usability problems were solved.
Current DeFi protocols are similar to previous Web2 protocols in that they are complex and guarded by fanatics who are philosophically opposed to engaging with traditional financial services (TradFi). It’s not hard to see why crypto believers criticize TradFi given the failures that led to the 2008 crash, but this intransigence is holding back progress and realizing DeFi’s potential.
Combination of DeFi and TradFi
If DeFi and TradFi leaders decide to work together, they may look back on the current moment as a turning point similar to web browsing in the 1990s, when digital asset service providers broke down the barrier between TradFi and DeFi platforms, enabling mainstream adoption.
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While it may be difficult to imagine, there is already a well-established path involving traditional payment service providers (PSPs) to integrate cryptocurrencies and allow users to top up Mastercard directly from on-chain liquidity. This hybrid approach combines the efficiency and programmability of digital assets with the global reach of a familiar payment network, making it easier than ever to use cryptocurrencies in real life. It’s not about choosing TradFi or DeFi, it’s about integrating both to create a user experience that people want and need.
Users must send their digital assets to the debit card’s public key and be able to spend their cryptocurrencies anywhere they would normally use a Mastercard. It may not sound like a big deal, but in many ways it isn’t. However, by bridging the gap between relatively niche digital assets and mainstream financial service providers, there is a real opportunity to grow DeFi and provide access to finance to the billions of unbanked and underserved people of TradFi.
Wrong use case focus
Over the past 16 years, a multi-trillion dollar asset class has been created out of thin air. However, only a few are used in the real economy. Still, its use cases are focused on remittances and only a few have applications beyond cold storage and speculation. This lack of practicality is largely due to the closed system built on mutual distrust between DeFi community members and TradFi, which prevents popular cryptocurrencies from reaching their potential.
Connecting digital assets to TradFi removes previous barriers that prevented people from using their assets. Debit cards linked to digital assets can be connected to existing PSP rails to unlock their true potential. It may seem far-fetched, but previous technological breakthroughs occurred in short periods of time when usability issues were solved. Data silos, walled gardens, and unnecessary mistrust of traditional vested interests will need to be put aside in the future Web3 economy.
If we put aside these ideological differences, DeFi and TradFi could potentially accomplish much more than they currently do. By strengthening collaboration with existing infrastructure partners, service providers can accelerate the development of new products in the payments industry, improve existing architectures, and scale faster, while reducing costs for billions of unbanked and underserved people.
It doesn’t have to be a zero-sum game between opposing sides. By working together and using existing infrastructure, both sides can remove barriers and achieve more for everyone’s mutual benefit.
For too long, cryptocurrency evangelists have created complex systems within closed environments in response to TradFi’s failures. These pioneers have achieved great economic and technological achievements.
It is time to put aside the ideological differences that are hindering mainstream adoption.
Posted by: Mark Jones, founder of Hana Wallet.
This article is for general informational purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, ideas, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.