Why Entrepreneurs Should Adopt Hybrid Finance

Just as communication has evolved significantly, we’re now witnessing the same level of disruption that occurred in web 2.0 in the financial world with cryptocurrencies, often referred to as web 3.0.

In this lightning-speed chase, the disruption is more akin to a decentralized finance movement where borders and rules don’t exist. In this anarchic world lies the much-needed infrastructure to financially service a globally digitized world.

With over $100 billion currently locked in the DeFi landscape, there is every reason to believe that the ecosystem is living up to the hype. The technology itself has delivered a spectrum of applications bordering on autonomy and blockchain composability. However, as innovative as this new financial order looks, DeFi is incredibly risky. With the vulnerabilities of the Ethereum network in mind, the majority of products and services in decentralized finance aren’t safe. Primarily, regulatory oversight and lack of customer protection standards are issues for DeFi.

Hence, the explosion of DeFi and fear of missing out has put businesses at a crossroads. Do they decouple completely from the established financial order and set out to embrace and navigate the uncharted DeFi landscape in hopes of great returns? Or is it more prudent for businesses to stick to the conventional banking systems?

While it is common to view the two financial orders as parallel spectrums, there are instances where they converge for even more desirable effects than DeFi or CeFi alone. This possibility unlocks a third option, the implementation of a hybrid finance (HyFi) architecture.

What is hybrid finance?

Hybrid finance is a financial order that borrows elements of DeFi and CeFi to enable robust solutions. The goal here is to handpick the strengths of both sides of the divide such that the end product is impervious to the limitations of DeFi and CeFi. Therefore, it is ideal for businesses that understand the value proposition of DeFi yet want to preserve the benefits of traditional finance, including compliance and convenience.

With HyFi the user gets the DeFi benefits they’re after for their business. For example, much of the processes to still be executed on the blockchain. Nonetheless, the HyFi solution is different because it’ll opt to comply with regulatory requirements, improve user experience, and provide standard grievance redressal and customer support services.

Why do businesses need to consider hybrid finance?

Compliance

The introduction of platforms like DeFi.finance brings users the benefits that come with the adoption of HyFi systems. Their automated market maker, AMM, is the system powering most decentralized exchanges and is coming under the purview of regulators to help demystify DeFi.

The project has found a balance between decentralization and compliance such that institutional investors and businesses can now…