Home / News / Goldman Sachs’ Report on “TradFi 2.0” Says DeFi Should Help Support Valuation of Crypto Assets

Goldman Sachs’ Report on “TradFi 2.0” Says DeFi Should Help Support Valuation of Crypto Assets


Like cryptocurrency, decentralized finance (DeFi) is being institutionalized. This week Goldman Sachs released a detailed report on a DeFi ecosystem that includes “many of the same products and services as traditional financial systems” but without a centralized intermediary.

“No banks, no brokers, no insurance companies, only open source software connected to the blockchain.”

According to the report’s authors and analysts Zadi Paled and Isabella Rosenberg, the technology has the potential to disrupt existing market structures and is known as “one of the most attractive use cases for blockchain”.

Because blockchain is not just an alternative ledger or bookkeeping technology, it is said that its applications are not limited. Block-by-block updates in the smart contract blockchain are used not only to record peer-to-peer transactions, but also to record changes in complex system state, allowing the smart contract blockchain to run software and applications. Defi support.

Compared to traditional finance, DeFi is more accessible to people with underserved banks and has several advantages such as faster payment times, unique products, faster innovation, higher transparency, and higher efficiency.

Paled and Rosenberg write, but are “mostly in the works” and have experienced many hacks, loopholes and outright scams, and more challenging policy makers. ” They also pointed to structural weaknesses such as scalability of competition with traditional financial services technologies.

The report highlights Aave and Uniswap as the two main protocols demonstrating major applications in DeFi lending and trading/exchange.

Destroy the existing financial system

The report explains why when talking about growth in the DeFi sector over the past year, stable currency yields were “much higher” than guaranteed bank deposits. It is estimated that 3.5 million unique addresses interacted with the DeFi protocol.

The report notes that this rate of return is usually 5%, “about 10 times the rate of return on insured bank deposits,” and adds that this rate of return could be higher.

The Fed also noted that cash use of all age groups declined during the pandemic, while people in the 25-34 age group used cash to pay only 10% last year, according to the Fed’s research.

This could promote adoption of digital payment technologies, including cryptocurrency-based stablecoins. Globalization, along with digitization, has fueled the adoption of DeFi and the absence of KYC and AML rules, he said.

The report also mentions DAOs and covers “TradFi 2.0 innovations” that are growing very rapidly in the DeFi ecosystem. According to the report, the market focus has recently shifted from existing contracts to new projects such as Olympus DAD and Alchemix Finance known as “DeFi 2.0”.

“From the perspective of the broader financial system, DeFi is still a relatively small market segment and a very new skill set,” he added, adding that developers must create new mechanisms for unsecured lending to enter the more traditional financial sector. Although tighter supervision seems inevitable, it can slow industrial development.

“Nevertheless, many innovations in the field of decentralized finance point to the ways in which related technologies can disrupt or adopt existing financial systems. It also demonstrated strong use cases for blockchain and cryptocurrency technologies. , will help support the market over time. Valuation of these assets.”

Goldman Sachs’ report on “TradFi 2.0” states that DeFi should help support the valuation of crypto assets that first appeared on the BitcoinExchangeGuide.

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One comment

  1. May you share the link to the report? Thanks!