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This article was first published on TurkishNY Radio.
Traditional finance’s relationship with decentralized finance (DeFi) is once again under the spotlight after Ark Invest challenged comments made by venture capital firm a16z Crypto.
The discussion reflects a broader question facing the financial industry will banks and large institutions eventually adopt open blockchain networks, or will they continue building their own controlled systems?
While a16z believes most financial firms are interested in blockchain technology for efficiency rather than decentralization, Ark Invest argues that public blockchains will remain an essential part of the industry’s future.
The conversation comes at a time when banks, payment providers, and global asset managers are steadily expanding their blockchain strategies. At the same time, the market for tokenized real-world assets continues to grow, encouraging institutions to explore new ways of issuing, trading, and settling digital assets.
TradFi vs DeFi Why Ark Invest Challenges a16z
Lorenzo Valente, Director of Crypto Research at Ark Invest, openly disagreed with a16z Crypto’s recent assessment of where traditional finance is headed.
Reacting to the firm’s comments, Valente said the argument was “overly bearish and simplistic,” suggesting it overlooks how public blockchain networks continue gaining traction across the financial sector.
At the heart of the debate is how banks and financial institutions are expected to use blockchain technology in the years ahead.
According to a16z Crypto, companies are mainly interested in blockchain because it can reduce costs, speed up settlements, and improve operational efficiency not because they want fully decentralized financial systems.
To support its position, a16z pointed to several examples already taking shape across the industry.
These include Circle’s efforts to build blockchain infrastructure for institutional payments, the Canton Network’s focus on privacy for tokenized assets, and SWIFT’s ongoing work to incorporate blockchain into payment and tokenization services.
The firm’s view is that traditional finance will adopt the parts of blockchain that fit within existing regulatory and business frameworks while maintaining centralized oversight.
TradFi vs DeFi Why Public Chains Still Lead
Ark Invest believes the discussion is missing an important point public blockchain networks continue to prove their value despite the rise of private, institution-focused platforms.
Lorenzo Valente highlighted the growing number of tokenized U.S. Treasury funds launched on Ethereum, along with the widespread use of regulated stablecoins like USDC and USDT.
In his view, individuals and businesses continue to choose public blockchains because they offer open access, deep liquidity, and the ability for different applications to work together without relying on a single operator.
From Ark Invest’s perspective, these network effects give decentralized finance (DeFi) an advantage that closed, permissioned blockchain systems cannot easily match. As more users, developers, and financial products connect to public networks, their value continues to increase.
Carlos Domingo, Chief Executive Officer of Securitize, shared a similar perspective. He described private blockchain networks as “the intranet and private clouds of this era, a transitional step into a truly open and permissionless innovation model.”
His comments suggest that while permissioned networks may meet institutional needs today, many could eventually connect with broader public blockchain ecosystems as the technology matures.
Stablecoins Show Why Both Sides Have Valid Points
The rapid growth of stablecoins shows that the relationship between traditional finance and decentralized finance is more balanced than a simple winner-or-loser debate.
Large financial companies, including Visa, Mastercard, PayPal, and Stripe, have all introduced stablecoin-related products or payment services. Their involvement reflects increasing confidence that blockchain technology can improve cross-border payments, settlement times, and digital asset transfers.
At the same time, blockchain data indicates that public networks remain the backbone of the stablecoin market.
Ethereum continues to host the largest supply of USDC, while Tron handles a significant portion of global USDT transactions. Together, these two public blockchains process most of the world’s stablecoin activity.
This continued leadership supports Ark Invest’s argument that public blockchain infrastructure remains essential.
Even as financial institutions develop private blockchain solutions for specific business needs, the widespread adoption of Ethereum, Tron, and other public networks shows that open blockchain ecosystems continue to play a central role in the growth of digital finance.
Tokenized Assets Tell a Different Story
Although public blockchains continue to dominate stablecoin activity, the picture changes when it comes to tokenized real-world assets (RWAs).
Data from RWA.xyz shows that permissioned blockchain networks built specifically for institutional use, such as Canton and Provenance, currently hold the largest share of tokenized asset issuance.
These platforms are designed to meet the compliance, privacy, and operational requirements of banks and financial institutions. Ethereum remains an important public blockchain for tokenized funds, but its share of this market is still smaller than several enterprise-focused networks.
This difference highlights the priorities of institutional investors. When dealing with tokenized securities and regulated financial products, many organizations continue to favor environments that offer greater control, stronger privacy protections, and compliance with existing financial regulations.
DeFi and Traditional Finance Could Grow Side by Side
Rather than viewing decentralized finance (DeFi) and traditional finance as competing models, the industry increasingly appears to be moving toward a future where both serve different purposes.
Banks are adopting blockchain technology where it can improve payment processing, settlement efficiency, and asset management without changing their existing regulatory frameworks.
At the same time, public blockchain networks continue to attract developers, investors, and users who value open access, transparency, and permissionless innovation.
As tokenization becomes more common, the ability for private and public blockchains to work together could become increasingly important.
Instead of one model replacing the other, financial institutions may ultimately rely on a combination of permissioned networks for regulated activities and public blockchains for broader market access and liquidity.
Summary
The debate between Ark Invest and a16z Crypto highlights two different views of blockchain’s future in finance.
Ark Invest believes decentralized finance and public blockchains will remain essential as digital finance continues to grow, while a16z argues that traditional financial institutions will primarily adopt blockchain technology within controlled, permissioned environments.
Current market trends suggest there is evidence supporting both perspectives. Public blockchains such as Ethereum and Tron continue to handle most stablecoin activity, demonstrating the strength of open networks.
Meanwhile, institutional platforms lead the tokenized asset market, reflecting the importance of regulatory compliance and privacy. As blockchain adoption expands, the financial industry is likely to use both public and private networks, with each serving different but complementary roles.
Glossary of Key Terms
1. TradFi (Traditional Finance)
TradFi refers to the traditional financial system that includes banks, stock exchanges, payment companies, and other regulated institutions. In this article, it represents organizations exploring blockchain technology while operating within existing financial rules.
2. DeFi (Decentralized Finance)
DeFi is a financial system built on blockchain technology that lets people access services like lending, borrowing, trading, and payments without relying on banks or other intermediaries. Most DeFi applications run on public blockchain networks.
3. Public Blockchain
A public blockchain is an open network that anyone can join, verify, and use. Popular examples include Ethereum and Tron, which support stablecoins, decentralized applications, and digital asset transactions around the world.
4. Permissioned Blockchain
A permissioned blockchain is a private network where only approved participants can access or validate transactions. Banks and financial institutions often use these networks because they offer greater privacy, security, and regulatory compliance.
5. Stablecoin
A stablecoin is a type of cryptocurrency designed to keep a stable value by being linked to an asset like the U.S. dollar. Stablecoins such as USDC and USDT are widely used for payments, trading, and moving funds across blockchain networks.
6. Tokenization
Tokenization is the process of turning real-world assets, such as government bonds, real estate, or investment funds, into digital tokens on a blockchain. This makes ownership easier to transfer, track, and manage digitally.
7. Tokenized Real-World Assets (RWAs)
Tokenized real-world assets are physical or traditional financial assets represented as blockchain-based digital tokens. They allow assets like U.S. Treasuries, real estate, or commodities to be traded more efficiently in digital markets.
8. Interoperability
Interoperability is the ability of different blockchain networks and financial systems to communicate and work together. It plays an important role in helping public and private blockchains exchange information and support broader blockchain adoption.
FAQs About TradFi vs DeFi
1. What is TradFi vs DeFi?
TradFi vs DeFi compares traditional banking with decentralized finance. It explains how both systems use blockchain technology and where each offers different advantages for users.
2. Why does Ark Invest believe public blockchains matter?
Ark Invest says public blockchains provide open access, stronger liquidity, and better connectivity. It believes these strengths will keep DeFi relevant as institutional blockchain adoption grows.
3. Can private and public blockchains work together?
Yes. Many experts believe private blockchains will support regulated financial services, while public networks continue powering stablecoins, decentralized applications, and broader digital asset ecosystems.
4. What does the future of TradFi vs DeFi look like?
The future will likely include both systems. Financial institutions may use private networks for compliance while relying on public blockchains for liquidity, accessibility, and global connectivity.
