Not all changes (climate, for example) are necessarily good to take. But, when it comes to finance, the arrival of cryptocurrencies or DeFi (short for decentralised finance), seems to paint a more inclusive future. This is good news, especially when we know that more than 2 billion adults around the world are excluded from the banking system.
While regulators have seen the rise of DeFi as a risk to traditional finance, it has also been proven to carry major benefits. Over the last 18 months, more than $80 billion in capital has been injected into DeFi protocols. So the future of finance is undeniably on the move.
If more and more investors and individuals prefer to feed a DeFi platform than a traditional bank account, it is because they feel that the benefits are greater than the risks. Before deciding whether or not to follow the movement, we suggest you dive into the main characteristics and challenges surrounding crypto and decentralised finance. Let’s see what the future holds for this innovative FinTech vertical together!
What would a world in which decentralised finance is the norm look like?
Decentralised finance — often referred to as DeFi — refers to the shift from traditional, centralised financial systems to peer-to-peer finance powered by decentralised blockchain-backed technologies.
From borrowing platforms to stable coins (disposable tokens), the DeFi ecosystem actually consists of a vast network of integrated protocols and financial instruments. In fact, there is a wide range of possible uses of decentralised finance, whether you are an individual, an investor, a developer or even a centralised institution.
DeFi is often associated with blockchain technology and, therefore, with cryptocurrencies. However, it is less linked to its most publicised representative (Bitcoin) than to its main competitor. Ethereum, an open source blockchain platform, is indeed the main programming language used in the development of DeFi services.
DeFi solutions, which are still under development, thus cover a wide range of areas. In particular, they meet a number of users’ needs in the field of cryptography from confidentiality to liquidity, including insurance and transfers.
Platforms that allow individuals to secure their cryptocurrency transactions through guardians (other users or trusted devices) are emerging, such as Argent. Zumo, on the other hand, makes it possible to group your crypto wallets and it facilitates transfers between individuals anywhere in the world. As for Nexus Mutual, it is designing a decentralised alternative to insurance by allowing virtual communities to come together to pool their funds and share risks.
How is decentralised finance shaping our future?
Nevertheless, decentralised finance is not just a simple digital shift of the systems we have known until now. As its main critics are often derived from these very traditional systems, it presents a real disruptive potential from various angles.
DeFi as a tool to reduce financial inequality
The main effect of decentralised finance is to make financial services previously reserved for a minority accessible to all. This is particularly the case of borrowing, since projects are financed for the quality of the ideas and execution plan. The factors set by intermediaries thus become obsolete.
Rather than restricting the exchange of assets, such as stocks or foreign currencies, to market participants, the emergence of decentralised exchanges (DEX) means that cryptocurrency holders no longer have to leave the crypto space to trade their dematerialised goods. This is the case of Uniswap, for example.
Instant and secure transactions
DeFi provides a more transparent and secure transaction framework to replace many outdated processes. Smart contracts, for example, help automate many of the features of financial services. Decentralised finance also removes the need to trust a centralised managing entity.
Faced with new threats (hacking, data leakage), DeFi provides answers on the three strategic aspects of scale, pace and security. The robustness of its protocols makes it possible to borrow or lend money on a large scale between participants who do not know each other and without any intermediary. Interest rates are set based on demand, ensuring a fairer and more inclusive system.
Neutral technology vs. human fallibility
Centralised financial regulators focus largely on mistakes made by neglect or human embezzlement. These main flaws take the form of fraud, insider trading or modelling errors. Each one therefore depends intimately on the human factor in decision-making.
Unlike its human counterparts, a decentralised system (based on technology) acts neutrally. The cryptographic principles of blockchain ensure that information is documented only after its authenticity has been verified. DeFi applications therefore make it possible to identify and prevent possible financial scams and dishonest commercial practices.
Of course, decentralised finance always carries a share of risk. Often associated with money laundering, it is not immune to a poorly programmed algorithm. In addition, many DeFi protocols are tightly integrated into their native token, which can be more volatile in value than traditional assets. However, it is still the best tool for solving problems in the financial system. All in a single technological leap!
A future to be shaped: The challenges of decentralised finance
While DeFi has many advantages, it is important to consider its weaknesses in order to be able to correctly estimate its potential. This approach is necessary to perfect a system that is still in its infancy. In the near future, legislators will have to pay particular attention to:
- Its scalability. DeFi projects are undoubtedly adapted to enable the financial inclusion of a wider population. However, they face difficulties in the scalability of the host blockchain. The question of confirmation times and transaction costs (especially in times of congestion) will have to be addressed. This is especially the case with the new version of Ethereum;
- Its uncertainty. In the event of instability in the blockchain hosting a DeFi project, the latter could also prove to be more unstable;
- Liquidity concerns. Liquidity is also a critical factor in projects based on DeFi and blockchain protocols. As of October 2020, the total value blocked in DeFi projects amounted to more than $12.5 billion. It is therefore undeniable that the DeFi market is not as large as traditional financial systems;
- Shared responsibility. In decentralised finance, platforms do not cover mistakes made by users. Users will therefore have to take full responsibility for their funds and assets. It will therefore be necessary to design tools to prevent or cover possible human errors.
The digital transformation of finance is just beginning
Of course, the future of finance is not limited to DeFi. In its 2025 Finance report, Deloitte also predicted:
- The advent of the finance factory. Blockchain automation will simplify and speed up financial processes and transactions. This acceleration will allow individuals to play a more active role, in particular by becoming a security guarantee, as is already the case with some applications of decentralised finance such as Argent;
- The role of traditional finance will change profoundly. In order to continue to exist, it will have to prove its ability to bring value. This includes providing quality information and exceptional customer service. Some financial organisations will thus evolve into fully-fledged service centres;
- Financial cycles will be done in real time. When figures and forecasts can be produced instantly and on demand, traditional cycles lose relevance. Users will be able to demand more frequent information on the performance of their assets. This continuous flow of data will encourage the emergence of new ideas
- Self-service will become the norm. Services ranging from budget requests to reporting will be progressively automated. Smart agents will increasingly be able to assess what types of business information an individual needs. They will therefore be able to provide it proactively;
- The workforce and workspaces will also change. Finance professions are changing rapidly. The demand is particularly high for data scientists, business analysts and storytellers. The qualities sought will include customer orientation, flexibility and collaboration as well as technical skills, especially in terms of blockchain and data.
Even if it has the advantage of being more transparent, inclusive and secure, the DeFi space is still being defined. If it is to become established, it must still overcome the obstacles of scalability and instability.
The fact remains that if the future is, by definition, uncertain, it is our responsibility to think about it and prepare for it. This will imply traditional players such as those in DeFI (not forgetting individuals) taking an interest in new technologies and financial professions. And, in doing so, they will make the most of the changes to come.