- The majority of individuals and companies work with a single, major bank 
- The bank is in charge of rates and fees
- Switching banks is expensive
- The financial system in the United States is heavily concentrated
- DeFi solves this by not having to depend on these financial intermediaries
- Through DeFi, peers interact with peers on a decentralized organization

Butler University

University of Michigan - Ann Arbor

- Centralized financial system

- Inefficiency

- Lack of interoperability

- Opacity 

- Limited access


DeFi Solutions

Harvey, Campbell R., et al. “Defi and the Future of Finance.” SSRN, 15 Dec. 2020, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3711777. 

DeFi and the Future of Finance 

Centralized Financial System

Centralized financial system inefficiency comes in the form of:
- Long processing times
- Credit card interchange rate
- Slow and costly transfer of funds
- Direct and indirect brokerage fees
- Lack of security
- Inability to conduct microtransactions 

Inefficiency

- Financial institutions lock interconnectivity
- Transferring money traditionally can be complicated and time consuming
- DeFi transactions occur instantaneously and various decentralized exchanges 

Lack of Interoperability

- The current financial system is not transparent
- Bank customers have very little information on the financial health of their bank and must place their faith in limited government protections
- In the digital era, financial infrastructure has failed to adapt
- DeFi solves this by offering new opportunities while also promoting trust and security amongst all users without top-down control

Opacity 

- Many people are unbanked (1.7 billion), which makes obtaining loans and operating in the world of internet commerce very difficult

- Banks take priority to higher paid loans while suggesting outrageously high borrowing rates with credit card loans (^20%)

- DeFi allows for collectivization of financial products amongst the entire community

- Accessibility for all people is crucial in preventing widening wealth gaps

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