DeFi
Making sense of the role of embedded DeFi in the future of Web3
The Web3 space aims to transform payments and commerce via blockchain technologies.
And with the news on Wednesday (May 15) that Safe has announcement integrating native swaps directly within its Web3 SafeWallet platform, bringing the benefits of integrated decentralized finance (DeFi) – such as transparency, cost reduction and accessibility – into traditional finance and transactions daily is a priority for forward-looking organizations.
A native swap in the context of cryptocurrency refers to the exchange or trading of digital assets directly within a blockchain network without the need for third-party intermediaries or services. This is usually done through decentralized exchanges (DEXs) or liquidity protocols that run on the blockchain itself.
By providing users with access to DeFi services without the need to navigate complex blockchain interfaces or manage multiple wallet integrations, proponents of the Web3 space believe they will be able to expand adoption to what has traditionally been focused on technology and not user experience. driven cryptographic landscape.
According to the company’s press release, over the past three years, a total of $23 billion in swap volume has been made easier through Safe Smart Accounts – only previously, users looking to trade tokens had to navigate to external websites.
“Prioritizing seamless experiences and MEV (maximum extractable value) protection through intent-based architecture” is a “game changer,” said the Safe co-founder. Lucas Schor.
Learn more: How Integrated Payments Help Businesses Own Key “Micro-Moments”
Leveraging Web3 for Financial Services Integration
This move by SafeWallet is indicative of a broader trend in the FinTech sector towards integrated finance. Integrating DeFi protocols and services directly into traditional and non-traditional financial applications, platforms and services can streamline processes such as lending, borrowing and trading, making them more efficient and profitable.
Indeed, DeFi can offer new credit and lending models, such as collateralized lending, credit delegation, and decentralized credit scoring. These models can be integrated into e-commerce platforms, providing consumers with more flexible financing options.
By removing middlemen, DeFi can significantly reduce transaction fees associated with payments and transfers. This is particularly beneficial for cross-border transactions, which are typically expensive and slow with traditional banking systems.
And DeFi protocols can facilitate near-instant transaction settlement. This can improve the efficiency of payment systems and reduce counterparty risk associated with settlement delays.
Sheraz Shereresponsible for payments at Solana Foundationtold PYMNTS on Monday: “It’s important to know that crypto is not just bitcoin and Doge and NFT… Blockchains are truly alternative avenues for payments and financial assets.
Additionally, DeFi protocols are often interoperable and composable, meaning they can be combined in different ways to create new financial products and services. This flexibility enables innovative applications tailored to specific industry needs.
Learn more: This Week in Web3: Crypto Payment Rails and Regulatory Clarity
The regulatory elephant in the Web3 room
But while integrated DeFi offers many possibilities, it also presents challenges such as regulatory uncertainty, security risks and the need for user training. Addressing these challenges is crucial for the widespread adoption and success of integrated DeFi solutions.
Like PYMNTS did coveredDeFi services have come under scrutiny by lawmakers as being susceptible to abuse by bad actors due to their anonymity capabilities and the ability for end users to bypass your customer (KYC) checks and your company (KYB) during transactions.
By directly connecting buyers and sellers without any intermediaries, DeFi platforms aim to eliminate the risk of embezzlement or embezzlement. poor management of the platform (a la FTX) by leveraging algorithmic automation to anonymously match interested parties.
Of course, this entirely technical approach also helps obscure the various parties and is commonplace when it comes to money laundering and abuse by bad actors.
By a US Treasury Department report last April, “illicit actors, including North Korean criminals, scammers and cyber actors, are using Challenge services in the process of laundering illicit funds.
And as indicated in the “2024 national strategy to combat terrorism and other illicit financing“, a Treasury report released Thursday, May 16, the executive department “continues to work with Congress on potential legislation related to AML/CFT and sanctions frameworks for virtual assets and to evaluate possible regulatory clarifications for prevent illicit actors from abusing the virtual asset ecosystem.
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