Challenges of Present TradFi and DeFi

Unmet Financing Needs in Emerging Markets (EM)

Significant Funding Gap

• 41% of businesses in emerging markets face unmet financing needs due to the limitations of traditional finance (TradFi).

• A staggering $5 trillion funding gap restricts economic potential, representing 130% more than the funding currently available.

Lost Opportunities

• The inaccessibility of capital leads to billions of dollars in missed opportunities for businesses, stifling innovation and growth in these regions.

Access to funding has never been more crucial for the survival of businesses due to the lending-based global economy we find ourselves in.

DeFi’s Closed Yield Loop

Circular Yields in DeFi

• DeFi primarily generates returns from activities like lending, borrowing, staking, and liquidity provision on-chain, relying on user participation rather than real-world economic activity.

• This closed-loop system recycles existing capital, often resulting in volatile yields highly sensitive to crypto market fluctuations.

Lack of Real-World Integration

• Without incorporating real-world assets (RWAs) or external revenue sources, DeFi fails to tap into genuine, scalable growth opportunities.

• The absence of real economic value inflows leads to unsustainable APYs and limits DeFi’s potential for long-term stability.

An X post by Vitalik Buterin talking about where current DeFi yield comes from