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Decentralized finance is expanding quickly, but it is unlikely to replace traditional banking entirely
Instead, Zhu believes the future financial system will feature both on-chain infrastructure and traditional financial institutions operating in parallel.
Speaking in an interview with TheStreet Roundtable’s <a href="https://www.thestreet.com/<a href="https://xpertsstudio.com/trump-crypto-empire-faces-scrutiny-49-saudi-linked-stake/” title=”Trump Crypto Empire Faces Scrutiny: 49% Saudi Linked Stake”>crypto/author/alp-gasimov” rel=”nofollow noopener” target=”_blank”>Alp Gasimov, Zhu said the decentralized sector has grown rapidly even though it remains small compared with traditional finance.
“I think if you look at the absolute market size of DeFi or on-chain finance today compared to even centralized crypto, it’s still tiny, but it’s growing very rapidly,” Zhu said.
DeFi’s market share is rising
One clear sign of that growth is the increasing share of trading happening on decentralized exchanges.
Zhu said the share of decentralized exchange volumes compared with centralized exchanges has risen sharply over the past few years.
“That share was, I would say, three, four years close to zero. Today is probably close to 30%,” Zhu said.
Despite that rapid expansion, he emphasized that decentralized finance is still in the early stages compared with traditional financial markets.
“And yet it is still in a minority,” Zhu said, referring to the share of decentralized trading in the broader market.
Why banks will still exist
While some advocates believe blockchain-based finance could eventually replace banks, Zhu said he expects a different outcome.
“I don’t think that there will be a world where absolutely everything will be on-chain,” Zhu said.
He noted that many users will continue to rely on trusted financial intermediaries for convenience, regulation, or familiarity.
“There will always be certain demographics, certain countries, very efficient markets sometimes where there’s just a lot of trust in institutions,” Zhu said.
For that reason, he expects traditional finance and decentralized finance to coexist rather than compete for total dominance.
“I fully envision a world in future where there will be a thriving DeFi and on-chain ecosystem in parallel to the traditional finance,” Zhu said.
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Competition could reduce financial inefficiencies
Zhu said the emergence of on-chain systems could still reshape parts of the financial system by reducing inefficiencies, particularly in payments and transfers.
Source: finance.yahoo.com