Decentralized vs. Mainstream Financial Services

Comparing the state of programmable money to “mainstream” financial services

  1. An important aspect that characterizes some parts of fintech — but doesn’t apply to defi — is the partnership between fintechs and small, community-oriented banks. For example, Sutton bank, Cross River Bank, Emigrant Bank, East West Bank are providing white-label services to fintechs by acting as the bottom layer of their banking infrastructure.
  2. The most widely adopted fintech applications include payments and money transfer. Wallets and mobile payments, cards by challenger banks, and online banking are among the most impactful fintech services. We are also seeing an increase in lending. The regions most proactive in fintech adoption are Asia and Europe.

Takeaways on Defi

Insight #1: Activity is highly skewed towards “capital markets”

USD Locked in Compound. Source:
  • Liquidity pools / Automated Market Makers: Uniswap, Curve, Balancer
  • Lending protocols: Compound, Aave
  • Aggregators:, 1inch
  • Exchanges: Matcha, dydx
  1. Payments & Money Transfer: Traditionally, this is an almost $3T industry — and highly saturated in fintech. Within defi, standout projects include Flexa, Connext, and Sablier. Flexa is already helping merchants accept stablecoins through a private beta. Connext is enabling micropayments. Sablier is introducing the option of “streaming” your pay. All of these are innovative solutions, but that’s still not where the majority of defi is focused on. An opportunity could exist between payments, wallets, and capital markets. Defi is uniquely equipped to allow the assets parked in your mobile wallet to make money while you sleep. We do have Argent and Dharma as “frontend” apps with beautiful UX, but we have yet to see more “wallet” products focused on sending & receiving. Defi brings promising improvements compared to mainstream payments, which have much more complex rails (see my reading notes from Payments Systems in the US).
  2. Wealth management: Fintech apps like Personal Capital, Wealthfront and Betterment have garnered enormous success with tools that can automate and manage your budgeting and investing. Within defi, we have portfolio management tools such as Zerion and Instadapp, which also open you up to various investment vehicles and track your portfolio’s performance. What might be missing is a robo-advisor feature. A lot of defi investors are still using spreadsheets to track their returns — which is fair, but not everybody wants to follow their investments obsessively. Some people would rather take the dollar-cost averaging or long-term/passive approach.
  3. Consumer lending (not just for assets): When we think of lending in defi, perhaps the most compelling concept that comes to mind is flash loans. What is still missing is the feasibility (and a user’s willingness) to take out a loan for a longer period of time, for purposes other than trading.
  4. Real estate investing: We have seen some projects that leverage the blockchain to tokenize real estate and farmland. Defi has made it extremely easy to create synthetic assets. We will need to build up the systems and products to convert real assets into their synthetic versions, and track their ownership as well as value over time. We will go deeper into this in insight #2.

Insight #2: New digital assets

Insight #3: The new financial stack

Insight #4: Impact of CBDC on acceptance of stablecoins

Detailed comparisons by fintech category

Wealth Management ($75T)

  • Robo advisors: Wealthfront, betterment, Ellevest
  • Retail investing & portfolio management: Robinhood, Personal Capital
  • Personal finance: Digit, Albert, ClarityMoney
  • Portfolio management + investing: InstaDApp, Zerion, Ray, Idle Finance, Snowball Money, Set Protocol, Argent, Dharma

Capital Markets ($74T)

  • Exchanges: IEX, Mercatus, Trumid, Openfin, LTSE
  • Market Makers: Citadel Securities, Virtu Financial
  • Exchanges: 0x, 1inch, dydx
  • Market Makers: Uniswap, Curve Finance, Sushiswap, Compound
  • Stocks, bonds, options, futures
  • Synthetic assets: Synthetic, PieDAO, UMA, Yam
  • Stable assets: USDC, USDT, ARCx, xDai
  • Derivatives: Erasure, Opium Network, Derivadex
  • Prediction markets: Augur, Flux, Polymarket, Veil

Banking ($9T)

  • Consumer: Monzo, Chime, Revolut, Nubank, N26
  • Corporate: Brex, Mercury, Ramp
  • This is an area where it is still unclear which key players in defi have emerged, though there are a few CeFi players like Kraken.

Real Estate ($9T)

  • Blend, Figure Technologies, Qualia, Cadre
  • Similar to banking, slightly less presence of real estate investing in defi (so far), though we’ve seen a few crypto projects like Slice and Figure.

Lending ($7T)

  • Marketplace lending: SoFi, Lufax
  • Direct lending & underwriting: Affirm, Credit Karma, Earnest
  • Business lending: BlueVine
  • Compound, Aave, Maker, Alpha Homora, RenVM

Insurance ($5T)

  • Healthcare, dental, “full stack”: Oscar, Clover, Zenefits, Clearcover, Gusto
  • Home: Hippo, Lemonade
  • Car: Metromile
  • Life: Ethos
  • Opyn, Nexus Mutual

Payments & Money Transfer ($3T)

  • Online payments processing: Stripe, Bolt, Airwallex, Adyen, Flywire, Razorpay
  • POS: Square, Toast
  • Personal payments & wallets: Alipay, Transferwise, Grab, Remitly, Paga, Zelle
  • Online payments/POS: Flexa, Connext
  • Personal payments: Sablier

Accounting ($106B)

  • Pilot, divvy
  • Most accounting in defi today exists in portfolio tracking, which also includes guidance on taxes.

Compliance & Risk Management ($17B)

  • KYC, AML, credit scoring: Cognito, Onfido, Nova Credit
  • Risk: Ayasdi, Robust Intelligence, Sift Science
  • Risk management in defi still seems to sit in insurance, such as protection against smart contract failure (Nexus Mutual) or hedging your positions (Hegic, Opyn)

Data Aggregation ($16B)

  • Plaid, Yodlee
  • Oracles: Chainlink, API3, Razor Network, Dune Analytics

Financial Infrastructure APIs

  • Banking infrastructure API: Starling bank, Treasury Prime, Alloy, Railsbank
  • Bank Connector API: Plaid
  • Card issuing API: Marqeta, Stripe
  • Infrastructure: The Graph, Covalent




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