Goldman Sachs: DeFi has more advantages than traditional finance

Goldman Sachs said in a report released yesterday that decentralized finance (DeFi) can provide certain advantages over traditional finance. 

Goldman Sachs’ co-head of foreign exchange strategy, Zach Pandl (Zach Pandl) said in the report that DeFi is easier for people without bank accounts to access and provides users with faster settlements, but it is still under development, and there are hackers, Vulnerabilities and flaws such as “outright scams”.

The report believes that the advantages of DeFi also include unique products, faster pace of innovation, higher transparency, higher efficiency and lower cross-border payment costs. All these factors will continue to pose challenges to the DeFi community as it faces resistance from policy makers who aim to protect consumers. In any case, the key to the development of DeFi has changed from whether these decentralized products are available to how to continue to grow and expand. 

According to the report: “Since mid-2020, the DeFi market has expanded dramatically—according to the most common aggregate measure, it has increased by approximately 10 times.”

Goldman Sachs: DeFi has more advantages than traditional finance

Since the explosive growth of the DeFi industry, the total locked-in value has increased from less than US$10 billion in the first half of 2020 to nearly US$100 billion today, an increase of 900%.

DeFi’s high yield may be the biggest incentive for the industry to increase, and speculation may also play a role. “But user adoption rates may also be related to long-term trends, including digitalization, globalization, and declining trust in centralized institutions,” they said.

Although some products are unique to the DeFi ecosystem, they also have many overlaps with traditional finance. “The main difference is that the DeFi field is almost completely decentralized: there are no banks, brokers or insurance companies, only open source software connected to the blockchain.”

Goldman Sachs said that overall, DeFi innovations show the potential to be adopted and disrupted in the existing financial system. “DeFi has also shown us a compelling use case for blockchain and cryptocurrency technology that, over time, should help support the market valuation of these assets.”

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