“TradFi” is a shorthand term for “Traditional Finance.” No, TradFi isn’t crypto. Traditional Finance (TradFi) is the opposite of the crypto world—it’s the established, centralized financial system that existed long before cryptocurrencies came along. It refers to the conventional financial system, including banks, Wall Street, investment firms, credit unions, stock exchanges, and other established institutions that have been the backbone of finance for decades (or even centuries). Think of it as the old-school way of handling money—checking accounts, mortgages, trading stocks through brokers, that sort of thing. It’s often contrasted with “DeFi” (Decentralized Finance), which is the newer, blockchain-based alternative that’s all about cutting out middlemen like banks and using smart contracts instead. TradFi is centralized, regulated, and runs on legacy infrastructure, while DeFi is more of a wild, tech-driven frontier.
Crypto, on the other hand, is a key part of Decentralized Finance (DeFi), which uses cryptocurrencies like Kaspa, Bitcoin, or Ethereum and runs on blockDAG or blockchain networks to bypass those traditional middlemen.
Crypto.com’s Definition of TradFi:
Traditional finance, commonly known as TradFi, is a conventional approach to financial activities that relies on established institutions, regulations, and intermediaries like banks, insurance companies, and stock exchanges. It encompasses various services like banking, investment management, and asset trading. Key characteristics of TradFi include a centralized structure, where financial transactions are often facilitated through brick-and-mortar institutions like banks. In TradFi, financial decisions are often based on established financial models, theories, and analysis. Traders in TradFi generally follow traditional investment strategies and utilize financial instruments like stocks, bonds, and mutual funds. Although TradFi has been the dominant financial system for centuries, it faces challenges in terms of accessibility, efficiency, and inclusivity. The advent of technology and digital innovation has given rise to alternative financial systems like cryptocurrency and decentralized finance (DeFi), which aim to address the limitations of TradFi. (Source: https://crypto.com/glossary/tradfi)
Video Explanations:
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