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How DeFi solves the key issues in TradFi
(DOMANI is an oracle-less Digital Asset Management platform that enables users to create, mint and manage ETF-style tokenized funds. The views expressed in the article below should not be taken as investment advice. Always do your own research.)
Asset Managers currently manage over $100 trillion in assets, of which index funds and Exchange Traded Funds (ETFs) make up close to $6 trillion. This is a massive industry, with its roots set in the history of modern finance, but it does not mean it’s completely untouchable to innovation and, in our opinion, it’s ready for some disruption.
DeFi has seen an immense boom since its inception in 2018, and has been able to amass a total value locked of $180 billion at its peak in late 2021, but the beginning of DeFi started much earlier. The initial launch of Bitcoin after the financial crisis of 2008, gave early crypto adopters hope that there could be a future in which finance was democratized. Whilst being considered a potential store of value and an alternative to fiat currencies, the technological capabilities of Bitcoin were limited. Thanks to the launch of Ethereum in 2013, and the creation of smart contracts, created a solid framework for the electronic settlement of contracts, which could be used by protocols to build financial products on top of.
We have Ethereum to thank for the beginning and adoption of DeFi, by creating a secure framework on top of which computer code can be deployed, executing instructions exactly as written. It is exactly this framework that can be linked to the control of crypto assets, which can be used to create financial products. The main difference between TradFi and DeFi, is that, to date, financial intermediaries and regulators have been entrusted to ensure that the products work as advertised. In contrast, the Rule of Code prevails in DeFi, where users have to trust the smart contracts to work as intended and that’s exactly how DeFi can add immense value to TradFi, by cutting out the middleman and streamlining legacy processes.
The inefficiencies of TradFi and Regulators
In the case of ETFs and index funds, the process to start up an index fund in a novel industry, for example Crypto, is extremely lengthy and overly bureaucratic. To add insult to injury there’s also a likelihood that your ETF’s application to the regulator could be rejected, as has been the case with Grayscale. However, creating, minting and managing a tokenized crypto fund, similar to an ETF, takes minutes on the DOMANI platform and requires no pre-approval by a regulatory body.
About DOMANI Protocol
DOMANI Protocol is an asset management protocol that facilitates portfolio tokenization, rebalancing, and a multiswap DEX to trade a multi-token position in a single transaction.
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