The missing link between TradFi and DeFi

"I don't think this opposition will last," believes Pablo Veyrat, co-founder of the Angle protocol (which issues a euro stablecoin). "Before long, there will be only one way of doing finance, and it will be based on blockchain infrastructures", he anticipates. Blockchain could thus become a standard, a kind of API for doing finance." 

"Currently, each financial institution develops its own infrastructure on its own, which is not neutral from a financial point of view. On top of that, there is the problem of connecting all these players", stresses Pablo Veyrat. 

With blockchain, we could end up with a common technological base, fewer intermediaries and therefore costs reduced to a minimum for everyone. The Morpho protocol, which offers loans on the Ethereum blockchain, is designed with this in mind. "We are developing a common good capable of erasing market inefficiencies," explains co-founder Paul Frambot. "Anyone can use it to offer financial services", he points out. 

The tokenisation of financial assets is an opportunity for the world of decentralised finance (DeFi) to open up to the rest of the economy. 

This ambitious promise is likely to come up against resistance from the players involved. "Of course the change won't happen with a snap of the fingers, the sector needs to develop use cases that will make banks understand the substantial gains they can make," says Pablo Veyrat. 

The most likely scenario - and it has already begun in small steps -, is the gradual migration of part of the banks' infrastructure onto blockchain. SG-Forge's experience is perhaps the best illustration of the phenomenon. 

Between TradFi and DeFi, everyone will probably have to put a little water in their wine to see a single, more efficient infrastructure come together. On the one hand, financial institutions will have to cross the rubicon and opt for public protocols. But on the other hand, they will need to be assured of a degree of confidentiality, because total transparency is a problem in finance. 

So what might this future financial system look like? From the user's point of view, the change should not be very brutal. The interfaces will probably remain fairly similar to those we use today.

But under the bonnet, the coming revolution promises to be one of the biggest in the history of finance. The aim is to overhaul a system that has been built up gradually over 60 years, with additional bricks and intermediaries being added all the time. The aim is to redesign a fairer and more efficient financial system.