Decentralized Finance (DeFi) is changing the way people around the world think about money faster than any previous financial revolution. Banks, which have monopolized access to money since antiquity, are finally seeing their status called into question. From now on, DeFi is starting to offer an alternative that could upset the economic landscape and democratize access to finance.

This seismic shift in power from governments and banks to real people is long overdue, especially in developing countries where DeFi is already emerging as a tool for remittances and small loans. Financial inclusion is another important benefit DeFi can offer, especially when 1.7 billion adults are unbanked.

Related: The big unbanking: how DeFi finishes the work that Bitcoin started

The growth of the DeFi space is staggering. By taking concepts from traditional finance and turning them into transparent protocols via smart contracts, DeFi provides a trustless ecosystem that offers everything from insurance to loans to savings accounts. The appeal to DeFi is evident, with the total value of assets held in DeFi financial products exceeding almost $ 175 billion.

Yet with DeFi on the rise and governments and banks unwilling to lose control of the monetary system, they are turning their attention to issuing digital currencies themselves. Central Bank Digital Currencies (CBDCs) are seen as a way to maintain control of the monetary system while providing users with faster and cheaper transactions. If we move quickly towards the year 2030, what elements of decentralization can we expect to see in our daily lives?

DeFi in the future

Imagine, if you will, that it is 2030. Célia, a young Parisian, takes out her phone to buy a Eurostar Paris-London ticket. When she reaches the payment screen, she chooses her primary digital wallet. Turning to her wallet, Célia notices that her digital balance in euros has fallen. Nowadays, no one holds cash savings because loans can be taken out and repaid in a person’s wallet based on the value of assets they own and are repaid automatically over time.

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If DeFi plays a key role in 2030, so do CBDCs, which have become the default tool for banks around the world. China is leading the way by following the success of its previous trials. However, they lean for increased state control, scrutiny and censorship. As a result, DeFi has become the primary means by which individuals who value freedom choose to manage their finances and now underpin the global financial system. And because of the importance of DeFi, we’ve said goodbye to bank accounts, allowing us to access and use our money anywhere and anytime, and loans to borrow when needed.

Cryptocurrency’s goal of making money universally available around the world means that the underlying DeFi protocols provide liquidity on swaps, borrowings, and loans. And despite the complexity of DeFi, end users are unaware that they are directly interacting with these global sources of liquidity, as full privacy is guaranteed on all DeFi and all expenses.

In addition to this, we process all international payments on unconscious level two rollups (zk-Rollups), a scaling solution that aggregates hundreds of off-chain transactions into an Ethereum smart contract, thus helping to reduce congestion on the blockchain. Cryptographic evidence, known as SNARK, is produced, ensuring the validity of the evidence, and is displayed on the first layer. Offering free and open alternatives to government money, Bitcoin (BTC), Ether (ETH) and stablecoins without authorization are immediately spent and exchanged for all major government coins.

Overcome DeFi challenges

The way DeFi is going, it’s certainly a plausible future for her. Ultimately, however, for DeFi to achieve what many may consider a utopian future, there are some hurdles that must first be overcome.

One area to consider is that of barriers to widespread adoption. For example, the vulnerability of smart contracts, the unpredictability of the DeFi market, regulatory issues, and accessibility to emerging technologies.

Other centers around the space are too complex for the average trader or investor. And blockchain inefficiency is an issue that needs to be addressed, especially when it comes to power consumption and the cost of transactions over layer 1 protocols on the blockchain. While the alternatives have so far compromised security, early stage technological solutions are being emphasized. Examples of this include ZK-proof cryptography, or layer two solutions, packing more transactions in space, and therefore lowering costs.

Of course, some of DeFi’s challenges cannot be mentioned without talking about the naysayers. For example, Dan Berkovitz, Commissioner of the Commodity Futures Trading Commission (CFTC), says DeFi is a “bad idea”. And Tom Mutton, chief financial officer at the Bank of England, had said any CBDC would be “ten times more efficient per transaction” than Bitcoin. Yet one has to wonder if he realizes that zk-Rollups are already 1000 times more efficient than Bitcoin?

What is DeFi doing to overcome these obstacles?

We need more education. The DeFi Education Fund is an example of an organization trying to educate policy makers on the benefits of the DeFi ecosystem and help put in place a regulatory framework for it. With the aim of improving knowledge about DeFi, this involves funding candidates working on research and advocacy on DeFi in legal research and DeFi practices, among others. With a better understanding of DeFi, mainstream adoption will be easier as new users are onboarded.

Related: Massive adoption of blockchain technology is possible, and education is key

Another way to increase the number of users is to improve the user experience. This is already seen with layer two protocols, which create wallets and infrastructure that support DeFi. And in doing so, they eliminate friction and cost and give users better ways to recover lost keys while making space less complex.

In the long run, however, regulatory clarity is something that will give confidence to traditional investment service providers such as banks and institutions while creating a pathway for users to access DeFi on their terms in existing applications. . What’s great is that many clients won’t even know they’re interacting with a blockchain behind the scenes, as all of the complex wallet interactions will be hidden. It is this collaboration between traditional finance and decentralized finance that could give DeFi the boost it needs to expand further to the general public.

Related: DeFi: Who, what and how to regulate in a world without borders and governed by codes?

Act now

Clearly DeFi is here to stay and could become the heart of finance in 2030. For that to happen, however, more needs to be done today.

Right now, it is the growing development of CBDCs that pose both a threat and an opportunity for DeFi as more countries experiment with them and governments begin to embrace them. But, just because CBDCs are gaining ground doesn’t mean DeFi can’t find its place in our future world either.

Yet if people want to control their own money and know where it comes from while giving developing countries access to banking services, then DeFi is the direction for the future. Essential elements of DeFi infrastructure, such as decentralized exchanges (DEX), borrowing and lending protocols, exchange aggregators that automatically find the best prices, and cross-chain bridges will also be needed by CBDCs. in the future if these government currencies want to be able to interact with each other and be used as fully digital currency.

DeFi therefore acts as an innovation laboratory, allowing different infrastructure problems to be tested at a breakneck pace and ensuring that the correct infrastructure required by CBDCs will already be available when they are deployed around the world. CBDCs that scale to take advantage of rapid innovation in public and DeFi blockchains will benefit from connecting to massive liquidity pools, allowing users, for example, to instantly trade between the digital euro and Ethereum, or use the DeFi infrastructure to earn a return on the digital book.

Related: Understanding the systemic shift from digitalization to tokenization of financial services

It is the CBDCs that are intentionally disconnected from DeFi that will lose to private stablecoins – one of the fastest growing sections of the crypto industry. But, we don’t need to rush to make it a contemporary reality. There are many hurdles that DeFi has to overcome before it sees the kind of mainstream adoption that is becoming present in everyday life.

By 2030, our Parisian friend Celia might not know what part of her transactions are CBDC and DeFi, and that shouldn’t matter to her. There is still a lot of work to be done to make this a reality. We hope that by 2030, Celia will be just one of the hundreds of millions of people who benefit from the bright highlands of a decentralized financial world, which will have forever changed the way we think about money.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research before making a decision.

The views, thoughts and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Will Harborne is co-founder and CEO of DeversiFi, a DeFi layer two trading platform powered by scalable technology from StarkWare. Will worked on technology consulting projects, first at Cambridge Consultants and then at IBM, before working full time in the public blockchain space and joining Bitfinex in 2017. There he led several projects before to combine his experience with his passion for Ethereum. permissionless innovation ecosystem to help launch Ethfinex. Will is a member of the Melon Technical Council, one of the first major governance experiments for a blockchain-based protocol. He also holds a master’s degree in engineering from the University of Cambridge.

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