What's the difference between TradFi and DeFi?
Asked 4 years ago
Hi, could someone please explain the difference between TradFi and DeFi? I'm having difficulty understanding how they're different. Thanks.
Garrett Diaz
Friday, April 22, 2022
In DeFi, decentralized ledgers act as the source of trust, controlling all activities in the financial space. Contrary, public governance (laws and licensed financial institutions) serve as the trust source, regulating all activities in TradFi.
DeFi continues to gain more admiration primarily because it is more open and transparent than TradFi. The minimal entry barriers imply anybody with an internet connection and some coding knowledge can create financial tools on decentralized ledgers.
On the other hand, high and burdensome entry barriers make it almost impossible for TradFi to embrace emerging financial trends. The requirement of applying for numerous licenses and authorization from government entities limits innovation in TradFi.
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