It’s widely accepted that our current banking system has significant flaws. Beyond systemic and geopolitical risks — like restricted borders, time zone barriers, and central bank dependencies — there are challenges with bank wires, international settlements, and the inconsistent availability of credit. A fundamental issue lies in the mismatch between banks’ balance sheets and their leverage. When a bank faces liquidity or insolvency issues, as seen with First Republic and Silicon Valley Bank in March 2023, depositors risk becoming creditors in a bankruptcy unless the government intervenes — leaving taxpayers to cover the fallout.

This fragility has led to growing interest in decentralized solutions from both retail investors and institutions. By removing human error and poor decision-making from the equation, Decentralized Finance (DeFi) offers a compelling alternative. We believe DeFi has the potential to fundamentally transform how we transact, bank, borrow, and invest.

Here are three emerging ways in which DeFi is poised to create a future where financial services are digital, open, always-on, and borderless.

1. Tokenization of Real-World Assets

The tokenization of real-world assets, such as real estate, fiat currencies, or bonds, is becoming a key trend. These tokenized assets can act as collateral in next-generation DeFi lending markets. Bitcoin and Ethereum, for instance, are considered pristine collateral because their use can be automatically governed by smart contracts without needing a third party, like a court, to adjudicate disputes.

Tokenizing physical assets like real estate or government bonds creates similar opportunities, although it requires oracles to provide real-world pricing and cash flow data. As this ecosystem evolves, individuals and institutions will increasingly use a broad range of tokenized assets to access lending services, unlocking liquidity and expanding borrowing options across global markets.

2. Always-On Lending Marketplaces

DeFi protocols are creating 24/7 marketplaces for lending, borrowing, and asset swapping. These platforms operate continuously, allowing users to lend assets like Bitcoin, Ethereum, and USDC, and earn yield in return. In the future, we expect to see tokenized assets such as government bonds and real estate added to these pools.

Unlike traditional markets, where hidden leverage and rehypothecation, the risky banking practice of lending out your assets multiple times, can create systemic risks, DeFi’s transparent smart contracts ensure that collateral is clearly managed, reducing counterparty risks. A growing number of Bitcoin holders are utilizing technologies like wBTC (wrapped Bitcoin) to borrow stablecoins on markets like Aave without selling their Bitcoin, maintaining exposure to its price appreciation.

In this setup, loans are secured by digital collateral, and if the value of the collateral decreases, the borrower either adds more collateral or risks liquidation — ensuring a healthier lending environment without the opaque risks present in traditional finance.

3. Becoming Your Own Bank

Perhaps the most revolutionary aspect of DeFi is the ability for individuals to become their own banks. Throughout history, we’ve seen multiple banking crises — from the savings and loan crisis to the 2008 financial meltdown, and most recently, the 2023 crisis caused by rising interest rates. Historically, during times of instability, savers moved their wealth into physical cash outside the banking system.

Today, DeFi offers a modern solution. Advanced multi-party computation (MPC) wallets allow users to store and manage their assets securely, with on-chain verification ensuring they retain control. Individuals can now store value in stablecoins, invest in digital assets, and access decentralized lending and borrowing services — all without relying on traditional banks.

With tools like separately managed accounts (SMAs), users can hold their assets in their own digital vaults, free from the balance sheet risks of banks. This level of autonomy mirrors traditional financial strategies but extends them to the realm of crypto, giving people unprecedented control over their financial future.

Conclusion: A Decentralized Future

In the coming decades, DeFi will become the backbone of financial services. The term “DeFi-based banks” may fade away as it becomes the standard infrastructure for financial services. In this world, tokenized real-world assets will unlock new possibilities for borrowing and lending, decentralized platforms will provide always-on banking services, and individuals will have the power to be their own banks — maintaining full ownership and control over their assets.

If we want a future where financial services are transparent, secure, and democratized, we must pay attention to the innovations taking place in DeFi today.

– Bill Barhydt, Abra’s ceo, Abra

As we push towards Web3 mass adoption, there has been a major emphasis on educating crypto traders. While a solid start, we could have a more lasting impact if we also focus on education through the workforce.

In the late 1990s and early 2000s, companies began moving away from outdated operational technology and embracing the benefits of the World Wide Web and email en masse. Transitioning from fax to email and filing cabinets to cloud storage, those who lived through this technological revolution can remember the arduous onboarding and clunky changeover.  Over recent years, employees across all industries have been keeping up with the rapid changes taking place, such as incorporating instant messaging, generative AI, time tracking, multi-factor authentication — the list is endless. But we are so eager to forget the lessons learned and our impressive agility when applying it to Web3, which in turn has neglected the growing gap between Web3 novices and Web3 experts, as well as those interested and those skeptical of the budding industry. 

Until recently, Web3 felt like a niche interest. If you didn’t work for a blockchain protocol, you were relatively insulated from the industries’ happenings. But now, as mass adoption of Web3 technology quickly approaches, it’s becoming less of a vertical, spanning its wings across all industries with everyone needing to get on board and up to speed.

The key isn’t just to focus on onboarding customers; it’s also about successfully equipping employees with the knowledge and tools they need to thrive in this decentralized era. Companies have invested so much in education with a focus on trading, but have not turned their attention to the portion of the workforce that remains unfamiliar with the technology that will be responsible for creating, facilitating, communicating and operating Web3 products and services. 

The Growing Relevance of Web3 in the Modern Workforce

By 2030, the blockchain market is projected to reach a staggering $1.4 trillion, indicating that decentralized technologies are rapidly becoming essential infrastructure across industries. As Web3 begins to saturate the market like Web2 once did, companies have to start closer to home when it comes to education.

According to LinkedIn’s 2023 Jobs Report, blockchain skills saw a 300% increase in demand year-over-year. However, the talent pool remains focused on technical roles, leaving a significant gap in positions requiring non-technical Web3 knowledge such as sales, marketing, HR, communications, and business administration.

Consider the various operational shifts Web3 demands. Data management, for example, transitions from centralized databases to blockchain-based decentralized ledgers, requiring employees to understand distributed storage and encryption protocols. Similarly, the shift from traditional digital identity verification to self-sovereign identities necessitates a rethinking of how companies manage user data. Even marketing and communications techniques are shifting away from social and traditional media. 

The Solution Moving Forward

These changes are inevitable, but many companies are struggling to keep up with the rate of change or are apprehensive to dive in head first, due to a lack of current internal knowledge and knowledge within external talent pools. 

Rather than waiting for the perfect hire who has been entrenched in Web3 since its inception, companies should invest in upskilling their existing workforce. A poll from a 2023 study by Casper Labs showed that over 87% of businesses were looking to invest in and incorporate Web3 solutions into their business models. 

To bolster the next generation of talent and prepare current employees for the transition, companies need to take action as soon as possible. In the immediate term, creating internal positions for Web3 educators is one pathway for companies to begin their integration. This means hiring people who already have a specific Web3 background to educate current employees, or budgeting for courses and third-party vendors for the purpose of Web3 education. 

On a longer-term trajectory, we need to go further back. This could mean facilitating partnerships with educational institutions to develop Web3-focused curricula in universities that could proactively start filling the talent gap, ensuring a steady pipeline of qualified candidates. On a grander scale, pre-collegiate education on the blockchain industry can also be a valuable resource, the same way basic coding classes are becoming a standard in secondary schools across the globe. 

Due Diligence for a Promising Future

With Web3 technology now influencing all industries across a multitude of roles, companies that want to remain competitive must build internal teams that can bridge the gap between traditional business functions and Web3 ecosystems.

The transition to Web3 in the workforce is taking place at this very moment but it won’t be seamless without a concerted effort from businesses, educational institutions, and policymakers. It is our responsibility as Web3 evangelists to ensure that all new and potential workforce members are equipped with the right tools and education to enter the space. Together, these stakeholders can build a robust Web3 education pipeline, ensuring that the workforce is ready for the decentralized future.

– Kelsey McGuire, Shardeum’s cgo, Shardeum

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