DeFi's Path to Institutional Adoption: Addressing Infrastructure Gaps
In recent years, talk of institutional adoption of decentralized finance (DeFi) has gained momentum. However, it's not just about regulatory clarity that institutions are concerned with, but also the infrastructure behind DeFi protocols.
Most DeFi protocols were designed for a permissionless world where anyone could participate without revealing their identity or proving eligibility. This openness allowed developers to create financial products accessible to all.
However, traditional finance (TradFi) institutions operate within established legal frameworks and have obligations that don't allow them to freely interact with current DeFi protocols. The infrastructure lacks mechanisms needed by these regulated participants.
To become institutional-ready, DeFi needs to evolve and adopt new approaches that fit individualized requirements of various financial assets. This includes recognizing different categories of participants and supporting assets whose transfer rules differ from those of standard ERC-20 tokens.