Decentralized finance (DeFi) will coexist with traditional finance (TradFi) rather than replace it, according to Brandon Neal, Chief Operating Officer of Euler Labs.
Speaking at ETH Denver in an interview with TheStreet Roundtable’s Jackson Hinkle, Neal explained how DeFi introduces competition that could make financial markets more efficient.
“More competition through non-intermediated markets, permissionless markets, I think can help compress spreads and force intermediaries to compete more effectively than they currently are,” he explained.
Neal clarified that DeFi isn’t about eliminating TradFi but creating an alternative system that can coexist.
“I see DeFi running in parallel,” Neal said, noting that both systems serve different needs.
DeFi benefits everyone, not just the top
Neal pointed out that in TradFi, major financial gains often stay at the top, while traders and investors get minimal returns after fees.
“But a lot of the gains, I think, have gone to Wall Street, not Main Street, and that's one potential area that DeFi can help solve,” he explained. “Right now, there's a rent-seeking attitude in traditional finance... it’s basically the way things have been structured, and you can understand why intermediaries try to extract maximum value.”
DeFi removes many of those barriers, allowing more people to participate in financial markets on equal footing.
Institutions are entering DeFi
While DeFi offers an alternative to centralized finance, Neal believes traditional financial institutions still have a role to play.
"There's a place for centralized intermediaries. There's risk mitigation that can be done, there's know your customer (KYC), know your business (KYB), things like that that are somewhat critical," he said. "I'm not one of the people that thinks we should do absolutely zero checking."
He also acknowledged the role of TradFi in protecting consumers from fraud.
"I don't want finance terrorists or children to be exploited. I don't think any proper builder in the space wants those things to happen," Neal said. "It's tricky, because a lot of these things happen right now in TradFi despite all of the attempts against it."
Faster settlements will drive DeFi adoption
According to Neal, one of DeFi’s biggest advantages is its speed compared to traditional financial systems.
“The thing that I've heard most from former TradFi colleagues is that there's an appetite for the settlement side, basically to have much, much faster and better settlements,” he said.
Crypto transactions clear much faster than traditional banking methods.
Bitcoin transactions settle in about 10 minutes, while stablecoins can process even quicker. In contrast, traditional bank transfers can take 2-3 business days, and even longer for international payments.