Will Decentralized Finance Replace Wall Street?

As blockchain technology grows more and more prominent, people everywhere are starting to ask about the endgame. Some even suggest that decentralized finance will one day replace Wall Street.

In our opinion, the purpose of decentralized finance isn’t to replace Wall Street, but rather to give investors a choice. No matter what happens in the next few years, we do not believe Wall Street will be replaced by anything. Read on to learn more about the future trajectory of decentralized finance.

What is Decentralized Finance?

We hope that you find this article means you already know a fair bit about decentralized finance, but if you, for some reason, don’t, in brief terms, decentralized finance is financial options not backed by a centralized institution.

Currently, most financial paths in life result in working with institutions—from banks to market makers and investment institutions. Decentralized finance requires none of this, and there is no barrier to entry. Of course, you still have to have funds to start, but there is no entity turning you away just because.

Decentralized finance (DeFi) is still a developing space, but it includes options for banking, investing, and even receiving loans.

Will DeFi Replace Wall Street?

When talking about the future, especially one as far off as Wall Street becoming obsolete, we can only speculate. However, in our opinion, DeFi will never replace Wall Street.

It’s important to remember that replacing an existing entity was never the purpose of DeFi to begin with. Rather, it was meant to give individuals an alternative to the traditional banking system. As such, while we expect DeFi to grow exponentially, we suspect while it will rival Wall Street, both will continue to exist in the future.

That being said, Wall Street is an American entity/idea, and it’s important to note that it isn’t always prevalent in all countries around the world. While most countries that trade with the US know of its existence, many don’t. With the way the United States is currently alienating other countries with trade wars, it’s important to acknowledge that Wall Street could become obsolete on its own eventually. That being said, we suspect an equal replacement (perhaps under a different name) will rise. And that name won’t be DeFi.

The truth is, DeFi, due to the nature of it being unregulated (though more and more regulation is coming), will always be an alternative to a mainstream option. While it will grow and expand, we don’t doubt that the mainstream option will also persevere.

Why is Wall Street Scared of DeFi?

Although we suspect that DeFi will never replace Wall Street, there are still many investment moguls who like to fear-monger online. Why is that?

Well, even though both Wall Street and DeFi will be around in the future, DeFi does cut into Wall Street’s bottom line. Look at it this way.

In the past, if you wanted to invest, you likely had to go through a banker on an investment firm—both of which would take a cut of the proceeds. Now, you can circumvent this part of the process entirely when you use DeFi, meaning the person who would have gotten a commission before now will not.

We prefer this model as it returns more to the investor (as it should). Of course, there is more risk with DeFi, so many see this “cut” as the price of assurance. The problem we have with that is the fact that there is no assurance you will make the right trades, even with someone taking this cut. Therefore, we, like many others, prefer to take our chances with DeFi and even if we still lose, then at least we aren’t also paying a fee.

But that, in a nutshell, is the reason Wall Street hates DeFi—it takes money, and power, away from them. But like throughout history, when different arms of society have had to adapt to changes, we suspect Wall Street will go through an adaptation of its own, and it will find a way to make money off of DeFi.

Will Wall Street Adapt to DeFi?

Yes, there is no doubt in our minds that DeFi will eventually become an integral part of Wall Street—in fact, it already has, with large firms like J.P. Morgan and Goldman Sachs already making changes to include DeFi options for their customers.

Not to mention that both Bitcoin ETFs and Ethereum ETFs launched in 2024, and many asset management firms are looking into tokenization—two steps forward that indicate our market prediction will come true.

Should You Invest in DeFi Through Wall Street?

Because DeFi is still relatively new, it may be beneficial for those who already have accounts at asset management firms like J.P. Morgan and Goldman Sachs to explore what DeFi options have been added. That being said, we recommend venturing out on your own if possible.

Remember, the entire point of DeFi is to return the power of money, investments, and loans, back to the people. To remove the greedy banks from the equation. If you invest in DeFi through a firm like J.P. Morgan, then you are missing most of the benefits of DeFi in the first place.

Obviously, we want individuals to make informed investing decisions; however, if you know nothing about DeFi, then you should start with your current bank. We also recommend, though, that you spend time and money acquainting yourself with DeFi—even if you have to take a class or two. That way, you can eventually conquer DeFi on your own and experience the true benefits of managing your money and investments on your own.

Overall, if anyone is telling you that DeFi will take over Wall Street, you should know that they are uninformed. It is very unlikely, especially with the moves Wall Street-based firms are already making, that DeFi will replace the American finance conglomerate entirely. Rather, they will both remain options, with the latter integrating with the former. Regardless, if you are interested in taking back control over your money, then the time to start learning about DeFi and its future is now.