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Decentralized finance likes to tell a very simple story about itself. Billions of people are unbanked. Traditional finance is slow, exclusive, expensive and biased in favor of incumbents. Blockchains are open, permissionless, global and neutral. Therefore, DeFi will bank the unbanked.
Summary
- DeFi has not replaced traditional finance – it has enveloped it. Its money, identity, prices, access and liquidity still come from banks, regulators and centralized infrastructure, so it cannot reach people excluded by the system.
- Unbanked people have no shortage of products; they lack rails. DeFi assumes stable internet, identity, custody, legal recourse, and on-ramps – exactly what unbanked populations don’t have – making most narratives about “financial inclusion” structurally false.
- Until crypto builds new infrastructure instead of prettier interfaces, it’s just about optimizing capital, not people. Faster finance ≠ fairer finance – and without new rails, everything else is just theater.
It’s a compelling story. She is also increasingly disconnected from reality. After five years of explosive experimentation, DeFi has built an extraordinary parallel financial system – but almost all of it still depends on the very infrastructure it purports to replace. We haven’t built any new rails. We built new products on top of old ones. And this distinction is not cosmetic. This is the main reason why DeFi has failed to change or revolutionize financial services in any meaningful way.
Status quo?
Take a close look at today’s DeFi ecosystem. Stablecoins such as Tether (USDT) and USDC (USDC) – the lifeblood of on-chain activity – are majority backed by bank deposits, treasury bills or cash equivalents held in the traditional system. Fiat on- and off-ramps are controlled by regulated intermediaries who decide who has access and who does not. Oracles extract price data from centralized exchanges. Even user access is through app stores, browsers, cloud providers and payment networks that fit firmly into the existing financial and legal order.
This is not a review of a single project. This is a structural observation. DeFi has not replaced traditional finance. He wrapped it up. This packaging brought efficiencies, composability, and new market structures for people who already had access to capital, identity, banking, and legal protection. But it has not created a new financial system for those who do not have one. For the unbanked, DeFi remains distant, abstract, and virtually inaccessible – not because the technology is bad, but because the rails are wrong.
The question of infrastructure
The unbanked problem is not primarily a product problem. It’s an infrastructure problem. An unbanked person is not someone who is missing a yield optimizer or a decentralized exchange. This is a person who lacks reliable identity, reliable connectivity, reliable custody, reliable payments, reliable dispute resolution, and reliable recourse. They live in economies where money is unstable, institutions are weak, documentation is inconsistent, and access is intermittent.
DeFi, on the other hand, assumes a world of stable internet, stable electricity, stable devices, stable identity, and stable legal fallback. This assumes that you can acquire stablecoins through regulated gateways. This assumes you can save private keys. This assumes you can resolve the errors. This assumes you can afford the volatility. This assumes you can tolerate loss. These assumptions are invisible to insiders. They are deadly to outsiders.
So what happened? The industry followed the path of least resistance. Instead of rebuilding financial infrastructure from scratch, it optimized speed, capital efficiency, and narrative velocity. He focused on products that could scale most quickly in environments where capital already existed. It integrated with banks instead of replacing them. He mirrored the markets instead of rethinking them. It wasn’t irrational. It was pragmatic. This is how the industry survived. But pragmatism gradually turned into dependence.
Today, DeFi does not just interface with traditional finance: it is deeply linked to it. Its liquidity, stability, legitimacy and growth all depend on the health, cooperation and tolerance of the very system it intends to transcend. When regulators tighten, liquidity contracts. When banks falter, stablecoins falter. When institutions hesitate, adoption slows.
Admitting Addiction
This is not about decentralization. It’s financial parasitism with better UX. And that creates a strategic ceiling that the industry rarely recognizes. As long as DeFi depends on traditional finance for its core elements – money, identity, pricing, liquidity and access – it cannot serve populations excluded by traditional finance. It can only repackage funding for those already in the system.
This is why, after years of progress, DeFi adoption is still closely linked to wealth and not need. Money flows to traders, funds, technologists and institutions – not to small traders in Lagos, families in rural India or workers in unstable economies. The uncomfortable truth is that DeFi was optimized for capital, not people.
Modernizing the financial rails is not glamorous. It’s slow, politically complicated and operationally difficult. This means building a new payment infrastructure that does not require a bank account. New identity systems that do not depend on state issuance. New custody models that do not require individual technical sophistication. New credit systems that do not rely on formal financial history. New legal and social layers capable of absorbing errors, frauds and failures.
This work is not flashy. It does not produce symbolic graphs that go up to the right. It doesn’t generate viral stories or cash overnight. This looks more like infrastructure than innovation. But without that, everything else is just theater.
Finance does not change the world because it is programmable. It changes the world because it determines who can save, who can borrow, who can invest, who can transact, and who can plan for the future. These results are not produced by protocols alone. They are produced by systems that integrate technology with institutions, law, culture and human behavior.
DeFi masters technology. He has not yet seriously engaged with the others. That’s why the next phase of crypto won’t be about higher throughput, better composability, or more sophisticated derivatives. It will be a question of whether the industry is ready to step out of its comfort zone – away from financial centers, from institutional capital, from regulatory arbitrage – and take on the difficult and unglamorous work of building rails where there are none.
Not packaging. Not mirrors. Not extensions. Rails. Until then, the industry needs to be honest with itself. DeFi has not failed. But it hasn’t yet tried to solve the problem it was created to solve. He built a faster financial system. He didn’t build a fairer one. This remains the real work to be done.
