October 31, 2022: DeFi vs. TradFi 💵 💸

What narratives remain for DeFi versus TradFi?

Is this how DeFi ends… not with a bang, but with a whimper?

Since the May collapse, TVL in the entire industry has been essentially stagnant. Even for several months before the collapse, TVL had been stagnant.

We know macro conditions are atrocious. When rates were near 0% and money printing was en vogue, cheap dollars were getting dumped into DeFi. Now it’s the opposite. Dollars are being vacuumed out of the system en masse. Interest rates in the traditional economy are often better than DeFi.

So… is DeFi doomed? Should we all pack it up and go work for the banks? It feels as if DeFi innovation is still wildly more interesting than anything coming out of TradFi, and therefore would be a better bet for the long term.

Alunara @0xAlunara

Curve, Convex, Frax, Aura, Balancer, GMX, Dopex, Jones, Plutus, Umami, Redacted, Liquity, Vesta (?). To me these are the frontier protocols at the application level still building diligently. Anything else I'm missing? I don't hold the respective tokens for the majority btw FYI.

Let’s evaluate this gut feeling with a bit more rigor. We break the question down into six categories where DeFi may be thought to have an advantage over TradFi, and subject each of these arguments to scrutiny.

1. High Dollar Yield: Draw

2. Crypto Asset Yield: Advantage DeFi

3. Composability: Draw

4. Convenience: Slight advantage, DeFi

5. Transparency: Advantage DeFi

6. Accessibility: Slight advantage, DeFi