Software is disrupting financial services – a renaissance is emerging as the closed proprietary systems of Traditional Finance (TradFi) converge with permissionless, open-source Decentralized Finance (DeFi) protocols on public blockchains. The wider impact on society is presently unnoticeable to the general public. However, as EVERY asset continues to be tokenized, from commodities to intellectual property, massive amounts of users will move onchain. Is the “TradFi in the front, DeFi in the back” strategy key to mainstream adoption?
Coinbase’s launch of bitcoin-backed loans delivers the simplicity of a user-friendly mobile application powered by DeFi in the backend. Instantly borrowing USDC by selecting the amount of bitcoin to pledge as collateral is a familiar fintech experience. Underneath the hood, Coinbase converts your bitcoin to cbBTC (Coinbase Wrapped BTC) and deposits into Morpho, an open-source lending protocol on the Base network. No wallet download, seed phrase, changing networks, or visiting Morpho onchain required. Unifying the traditional fintech experience with the benefits of blockchain.
Will traditional exchanges such as the Nasdaq and NYSE follow a similar trajectory? Coinbase CEO, Brian Armstrong recently confirmed work towards natively integrating Decentralized Exchange (DEX) support, reporting “customers shouldn't need to know or care whether the trade is happening on a DEX or CEX”. With one million tokens created weekly, exchanges and regulators will require adoption of new processes for the evaluation and listing of products.
World Liberty Financial, a lending application for supplying and borrowing USD-pegged stablecoins and “non-security” digital assets is embracing the TradFi in the front, DeFi in the back strategy. Affiliated with the U.S. president, World Liberty Financial is reportedly focused on minimizing the complexity associated with DeFi by designing a user-interface for first-time users, while integrating Aave, the largest lending protocol by TVL with $17.98 billion in March 2025. For the integration, AaveDAO will receive 20% of the protocol fees generated by World Liberty Financial and 7% of the total supply of project tokens. Brands with large distribution channels, successful in making blockchain invisible, are the best positioned for onboarding the general public.
The ‘Fat Wallet’ thesis posits that wallets are the optimal frontend positioned to monetize value due to their concentration of wealth, control of distribution, and proximity to users. Digital wallets serve as the first touchpoint for a newcomer onchain and have evolved significantly in the past decade from primitive “Send” and “Receive” functionality to feature-rich hubs for chat, trending applications and collectibles. Some wallets function as a user-friendly interface for DEX aggregators and NFT Marketplaces, while charging a fee for routing orders. Eliminating the inconvenience and necessity to visit these applications individually. Why purchase a separate camera, calculator, GPS, music player, video camera, and watch when you can buy a Samsung Galaxy?
Venture Capital firms are banking on this trend, with Phantom completing a $150 million Series C funding round at a valuation of $3 billion. In January 2025, Phantom boasted 15 million monthly active users, $20 billion in annual swap volume, 850 million onchain transactions, and $25 billion in self-custody assets. Will the majority of value accrue to applications and wallet providers or the blockchain infrastructures they are built upon? In comparison to Google and Hulu, the current protocols for the internet such as HTTPS and SMTP, are not household names. Value accrues to the application provider. In the past 365 days, three of the top 10 projects by revenue were blockchains. Tron, Ethereum, and Solana generated over $4.63 billion in revenue collectively, contrasted with Tether and Circle's accumulation of over $4.48 billion. Is the same trend happening in Web3?
Product design is trending towards the “iPhone moment” as builders prioritize familiar user-experiences powered by blockchain. With brands directly integrating smart wallets into their applications - onboarding to Web3 is becoming as simple as logging in with your email, passkey, and social account. Comparable to internet adoption in the 90s, once the challenges involved with infrastructure and user-experience are overcome, Main Street will follow, and Web3 will transition from the iPod to iPhone phase of innovation.
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