The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.
What we're seeing in the decentralized finance space today is radical innovation, fundamental freedom, and the rethinking of the forces guiding the world’s financial market. DeFi has been around for only a few short years, and has already managed to rebuild many categories of legacy financial products, including brokerage, asset management, lending, insurance, and payments, hence creating an interoperable, transparent, easily accessible, and more secure framework.
Decentralized financial platforms, whether they are exchanges, yield aggregators, or lending protocols, are seeing exponential growth. The collateral locked in Ethereum-based DeFi protocols alone has crossed $50 billion, up from $15 billion at the beginning of the year. Resultantly, digital asset funds, family offices, and traditional financial institutions have increasingly begun seeking exposure to this novel world of economic opportunities.
For them, however, crossing the chasm from CeFi to DeFi isn't as simple as it is for retail investors. When we think about what it means to be a financial institution, there's a whole spectrum of how regulated an entity is and the full body and complexity of legislation that applies to it. And the further we go from left to right, from non-regulated to heavily regulated, the harder it becomes for these entities to innovate themselves or to leverage the disruptive innovations in DeFi to gain competitive advantages.
As things currently stand, the threshold traditional institutions need to cross to do anything new is unreasonably high. For example, if we look at retail banks, which fall on the far right of the spectrum, they've taken years to develop mobile applications, and they still can't get it right. It's not that they didn't want to innovate; it's just that the post-crisis financial regulations have crippled them to the point of grinding halt.
The state of play in DeFi, on the other hand, is the polar opposite. Decentralized finance isn't (yet) burdened by strict financial regulations and isn't, loosely speaking, subject to patents, licensing, and corporate structures. The ecosystem effortlessly facilitates combinatorial innovation, allowing it to grow and innovate at breakneck speeds by building on the sustained efforts of passionate communities. This openness makes participation in DeFi free of knotty entry barriers for digital asset funds and family offices, positioned in the middle-left side of the regulatory spectrum.
In fact, we have already seen quite a few small and medium-sized hedge funds dabble into the space. Admittedly, that's only a tiny fraction of what's possible, but the more important thing is that the trend is nonetheless taking roots.
Building The Next Key Piece Of The Money Legos
As larger and more regulated institutions are just now figuring out the DeFi realm for the first time, it’s become imperative for those DeFi projects building from the inside to provide the robust infrastructure needed to ready the space for when the floodgates of institutional money finally open.
The Great Financial Migration is an intricate challenge, whose success counts on the deployment of breakthrough infrastructure capable of sustaining a $6.6T per day market. A legitimate candidate would have to assure scalability, composability, interoperability, and security, without forging the centerpiece of the puzzle - user experience.
Driven by the ambition to serve as the world’s de-facto decentralized reserve bank, Onomy Protocol is building the pillars that institutions will use to plug into DeFi. Focusing on many of the pieces indispensable to the ‘DeFi lego megastructure’, Onomy will simplify institutional onboarding into DeFi, allowing existing enthusiasts and oldschool TradFi players to experience the true might of blockchains and permissionless innovation.
Onomy looks to expand upon what Uniswap and other decentralized exchanges in the DeFi space have accomplished by building a DEX infrastructure specialized in supporting the Forex market. The railways powering the cross-chain performance-optimized Onomy Exchange are built on Cosmos, making the protocol 100x more efficient than the current solutions built on Ethereum.
Leveraging Onomy’s ecosystem, users of different profiles will be able to mint, trade, lend and pay with stablecoins of all denominations on modernized cross-border railways providing instantaneous settlement.
Ultimately, Onomy Protocol realizes that there’s still much friction to be reduced if DeFi is going to onboard more traditional financial institutions into the space. Hence, it plans to capitalize on this opportunity by positioning itself at the bleeding edge of the Great Financial Migration.
The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Visit Benzinga's Crypto Homepage - 1,000,000+ depend on Benzinga Crypto every month