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Decentralized finance likes to tell a very simple story about itself. That’s billions of people without sofa. Traditional financing is slow, exclusive, expensive and focused on incumbents. Blockchains are open, permissionless, global and neutral. Therefore, DeFi will bank the unbanked.
Summary
- DeFi has not replaced the traditional financial sector; it wrapped it up. The money, identity, prices, access and liquidity all still come from banks, regulators and centralized infrastructure, so it can’t reach the people the system excludes.
- Those without a bank account do not lack products; they are missing rails. DeFi assumes stable internet, identity, guardianship, legal remedies, and on-ramps – exactly what unbanked populations do not have – making most narratives of “financial inclusion” structurally flawed.
- Until crypto builds new infrastructure instead of nicer interfaces, it only optimizes for capital, not people. Faster financing ≠ fairer financing – and without new rails everything else is theater.
It’s a compelling story. It is also increasingly disconnected from reality. After five years of explosive experimentation, DeFi has built an extraordinarily parallel financial system – but almost everything still depends on the infrastructure it claims to replace. We didn’t build any new rails. We built new products on top of the old. And that distinction is not cosmetic. It is the main reason why DeFi has failed to meaningfully change or revolutionize financial services.
Status quo?
Take a close look at the current DeFi ecosystem. Stablecoins like Tether (USDT) and USDC (USDC) – the lifeblood of onchain activity – are overwhelming supported by bank deposits, treasury bills or cash equivalents held in custody in the traditional system. Fiat’s entrances and exits are controlled by regulated intermediaries who decide who gets access and who doesn’t. Oracles pull price data from centralized exchanges. Even user access is mediated through app stores, browsers, cloud providers and payment networks that are placed firmly within the existing financial and legal order.
This is not a criticism of a single project. It is a structural observation. DeFi has not displaced the traditional financial sector. It wrapped it. This packaging has delivered efficiency gains, composability and new market structures for people who already had access to capital, identity, banking and legal protection. But it hasn’t delivered a new financial system for those who don’t have one. For the unbanked, DeFi remains distant, abstract and largely inaccessible – not because the technology is bad, but because the rails are wrong.
The infrastructure problem
The banks’ problem is not primarily a product problem. It’s an infrastructure problem. An unbanked person is not someone without yield optimization or a decentralized exchange. They are someone who does not have 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 backlash. It is assumed that you can obtain stablecoins through regulated gateways. It assumes that you can secure private keys. It is assumed that you can solve errors. The assumption is that you can afford volatility. It assumes that you can tolerate loss. These assumptions are invisible to insiders. They are fatal to outsiders.
So what happened? The industry followed the path of least resistance. Instead of rebuilding the financial infrastructure from the ground up, it optimized for speed, capital efficiency and storytelling speed. It focused on products that could scale most quickly in environments where capital already existed. It is integrated with the sofas rather than replacing them. It reflected the markets rather than redesigning them. This was not irrational. It was pragmatic. That’s how the industry survived. But pragmatism slowly turned into dependency.
Today, DeFi not only interfaces with traditional finance, but is also closely linked to it. The country’s liquidity, stability, legitimacy and growth all depend on the health, cooperation and tolerance of the system it sought to transcend. When regulators become stricter, liquidity shrinks. When banks wobble, stablecoins wobble. When institutions hesitate, adoption slows.
Admitting dependency
This is not decentralization. It’s financial parasitism with a better UX. And it creates a strategic ceiling that the industry rarely acknowledges. As long as DeFi relies on traditional finance for its core activities – money, identity, pricing, liquidity and access – it cannot serve populations that traditional finance excludes. It can only repackage funding for those already in the system.
That’s why, after years of progress, DeFi adoption is still closely tied to wealth and not need. It flows to traders, funds, technologists and institutions – not to small merchants in Lagos, families in rural India or workers in unstable economies. The uncomfortable truth is that DeFi has optimized for capital, not people.
Modernizing the financial rails is not glamorous. It is slow, politically messy and operationally difficult. It means building a new payment infrastructure that doesn’t require bank accounts. New identity systems that do not depend on state issuance. New guardianship models that do not rely on individual technical refinement. New credit systems that do not depend on formal financial histories. New legal and social layers that can absorb errors, fraud and failures.
This work is not flashy. It does not produce token charts that go up and to the right. It doesn’t generate viral stories or overnight liquidity. It looks more like infrastructure than innovation. But without that, everything else is theater.
Finance doesn’t change the world because it’s 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 rules the technology. It has not yet seriously dealt with the rest. That’s why the next phase of crypto won’t be about higher throughput, better composability, or more sophisticated derivatives. It will be about whether the industry is willing to step out of its comfort zone – away from financial centers, away from institutional capital, away from regulatory arbitrage – and into the hard, unglamorous work of building rails where rails don’t exist.
No wrappers. No mirrors. No extensions. Tracks. Until then, the industry needs to be honest with itself. DeFi has not failed. But it has not yet tried to solve the problem it was created to solve. It built a faster financial system. It has not produced a fairer system. That remains the real work ahead.
