a16z: TradFi is not embracing the DeFi model, but accelerating the adoption of blockchain technology

BlockBeats News, July 14th, a16z released a blog post stating that as traditional financial institutions accelerate the exploration of blockchain technology, the market generally believes that the future will usher in a comprehensive integration of DeFi (Decentralized Finance) and TradFi (Traditional Finance), forming a new financial model that combines decentralized finance with the institutional distribution system. However, the reality may be different. The core driving force behind traditional financial institutions adopting blockchain is not to embrace the decentralized ideology, but to value its business value in cost reduction, settlement efficiency improvement, expanded distribution channels, and optimized customer relationship management. In the future, what may emerge is a new "programmable financial infrastructure" based on blockchain's underlying technology but optimized for institutional needs, rather than a simple integration of traditional finance and DeFi.

Institutions are selectively absorbing certain technological capabilities from DeFi and transforming them according to their own regulatory, risk management, and operational requirements. For example, atomic settlement can reduce counterparty risk, a shared ledger can reduce back-office reconciliation costs, programmable funds can automatically execute interest payments, margin management, and corporate actions processes, and automated market-making models are also being applied to on-chain forex and tokenized asset pricing. However, at the same time, native DeFi features such as open access, anonymity, and trustless execution often conflict with institutional requirements for compliance, control, and accountability tracking. Therefore, cases such as JPMorgan's institutional blockchain projects and BlackRock and Franklin Templeton's tokenized funds are fundamentally not about traditional finance entering DeFi, but about improving existing financial business processes using blockchain technology.

In the future, the blockchain industry will follow two development paths simultaneously: on one hand, enterprises and financial institutions will continue to drive the implementation of regulatory-compliant blockchain infrastructure, expanding the industry through applications such as stablecoins, tokenized assets, and on-chain settlement; on the other hand, open networks will continue to play the role of innovation source, constantly generating new financial primitives and market mechanisms, providing technological reserves for future institutional infrastructure. TradFi and DeFi are not in a competitive relationship but are developing together in different directions. Traditional finance may not fully adopt the DeFi model but gradually adopt parts that suit its own needs. True integration may ultimately occur at the underlying blockchain network level rather than one side replacing the other. For developers, the key is not to chase all markets simultaneously but to have a clear target audience: for institutions, products need to be built around compliance, risk control, and long-term business processes; for open networks, continued exploration of innovation, liquidity, and network effects is needed. The future financial system may operate on top of blockchain infrastructure, but the most important innovation may still first come from open networks.