Decentralized finance (DeFi) is currently disrupting the finance world with many decentralized applications (dApps) and tokens springing up to offer various kinds of financial services to people directly. This wasn’t always the case though. Not so long ago centralized financial institutions like banks, insurances companies, stock brokers etc., were the established means of accessing financial services. Now blockchain technology has changed everything. Inspired by the need to create transparency and democracy in the finance world (i.e., by eliminating middle men), decentralization has ushered in the age of crypto banking. This is the process whereby people can carry out bank transactions using crypto coins and decentralized applications. Through this method people can buy, sell, save, exchange or invest in crypto assets just like they used to transact with traditional financial assets. Initially, crypto banking or DeFi was well separated from traditional banking, also known as centralized finance (CeFi). This was because of practicality issues which limited certain transaction features like using bank cards, ATMs, saving, lending and borrowing etc. to traditional CeFi institutions with physical presence while early DeFi institutions focused on crypto generation, transfer and exchange. Some of these early DeFi applications include Bitcoin, Ethereum Network, Bitcoin Market etc. Hence, crypto banking was mostly limited to decentralized applications which offered services that were easily distinguishable from what could be obtained from traditional banks. As blockchain technology has continued to progress however, more and more financial services are now supported on decentralized platforms making such platforms more like CeDeFi (Centralized Decentralized Finance) applications than just DeFi applications. We now have services like decentralized exchange on apps like Uniswap, Pancakeswap, etc., crypto saving through stable coins, yield farming, and Lending-Borrowing services on applications like CoinRabbit, YouHolder, CoinLoan etc. Several decentralized platforms like CoinBase, Binace, MetaMask etc., even offer all these services in one application. However, a more recent concept is the introduction of platforms that primarily focus on integrating decentralized banking and traditional baking. This trend is noteworthy because it fundamentally switches the focus of crypto banking from just DeFi to more of CeDeFi. Examples of banks promoting this trend include both traditional banks like , and decentralized banks like and which were primarily released with such focus. JP Morgan and HSBC Current AgoraBank Crypto Banking as DeFi Decentralized finance is the foundation of crypto banking and the vast majority of decentralized applications available can be said to focus on DeFi services. DeFi services can be reasonably differentiated from traditional finance services like lending-borrowing, bank card usage etc. Some common DeFi applications are highlighted below. Blockchain networks like Bitcoin, Ethereum, Binance etc. which acts as the foundational software infrastructure for the creation of other cryptocurrencies, and decentralized applications used in carrying out DeFi transactions. Web 3 wallets like TrustWallet, WalletConnect etc. which are used in the generation of and handling of crypto wallet accounts for storing, sending and receiving cryptocurrency. Web 3 wallets focus on enabling individuals to have and manage an account on the blockchain network. Cross chain bridges like Binance bridge, Celer cBridge, Umbria Narni Bridge, Wormhole etc. which allow individual blockchains to relate with one another to facilitate wider reach of crypto transactions. Initially, individual blockchains were isolated in their functioning. Cross chain bridges were developed to facilitate communication between these isolated blockchains and enable the transfer of crypto assets from one blockchain to the other. Recently, technologies like polkadot have been created which allow new blockchains to be created with an inbuilt ability to connect to other blockchains. This list is not exhaustive as other DeFi focused crypto technologies can be identified. However, these are the primary ones and the focus here is to highlight the transition from these technologies. DeFi focused Crypto Banking has major advantages but in order to present customers with other useful banking services obtained on traditional banks, CeDeFi Crypto banking platforms began to emerge. Crypto Banking as CeDeFi The concept of CeDeFi emerged as people on both sides of the finance system (i.e., CeFi and DeFi) began to realize that while these individual systems had great strengths on their own, they were also quite limited when standing alone. For example, traditional banking has legitimacy, physicality and diverse services but is too centralized. Decentralized banking on the other hand is innovative, democratized and people focused but the rather new DeFi platforms are not as well known or dependable as the more established decentralized finance institutions. Also, even though DeFi platforms keep diversifying they still lack certain financial services easily offered by centralized finance institutions. Hence, it became apparent that combining these two methods of offering financial services would have great potential which will place any institution with such capability in a unique position to benefit from both worlds. This has resulted in the emergence of banking institutions which focus on offering both traditional banking services and decentralized banking services. This integration of decentralized banking and traditional banking is occurring in two ways which are highlighted below. 1. Traditional banks extend their services to the decentralized world. Some existing traditional banks have realized the great potentials of decentralized finance and are looking for different ways to integrate their services with the DeFi world to benefit from such disruptive technology. One popular way that this has been accomplished is the establishing of ‘branches’ in the metaverse by this existing banks. For example, JP Morgan and HSBC have partnered with The SandBox metaverse to establish themselves there while Quontic Bank has in the Decentraland metaverse. established itself This trend may likely continue as more traditional finance institutions try to benefit from the decentralized finance revolution. 2. Decentralized banks offer decentralized and traditional services. A number of decentralized banks have also discovered the potentials of extending their capabilities to provide customers with both the services that are typically available on decentralized banks and those that are obtainable on traditional banks. Hence, they have begun to market themselves as decentralized banks with traditional banking services. Two examples of such banks are AgoraBank and Current bank. These two are decentralized banks but also offer traditional services like bank card usage, saving with interest, lending and borrowing etc. AgoraBank is an already functional example of these recent decentralized CeDeFi banks so we further explore their operations through AgoraBank. The Agora Project AgoraBank is a decentralized bank developed by a team of well experienced finance professionals to make decentralized and traditional banking services readily available to people without the need of middlemen. On agorabank.io the stated objectives of the bank are; Create a decentralized bank that belongs to its users. Utilize blockchain technology to develop solutions that eliminate intermediaries. Obtain total transparency of financial transactions with maximum security. Leverage DeFi to create an ecosystem that places users at the center of everything we do. Redistribute revenues between AgoraBank and our users fairly and equitably. This exemplifies the focus of these decentralized banks that integrate the services of traditional institutions in their functioning. Conclusion Even though it is a recent technology, crypto banking is evolving very fast and is spreading into the traditional finance world. This is has resulted in the development of centralized and decentralized (CeDeFi) service platforms, a trend which could become the future of finance.
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