Goldman Sachs: DeFi Has Its Advantages Over Traditional Finance

DeFi is easier to access for underbanked populations and provides faster settlements for users, but it’s still a work in progress, the report stated.

article-image
share

key takeaways

  • The narrative around DeFi has shifted from whether or not these decentralized products on the blockchain can work to how they can continue to grow in scale, the report’s authors said
  • Since the DeFi industry has exploded, the total value locked has increased 900% from under $10 billion during the first half of 2020 to nearly $100 billion today, the report said

Decentralized Finance (DeFi) can offer certain advantages compared to traditional finance, a Goldman Sachs report said on Friday. 

DeFi is easier to access for underbanked populations and provides faster settlements for users, but it’s still a work in progress with flaws like hacks, bugs and “outright scams,” the report by Zach Pandl, co-head of foreign exchange strategy for Goldman Sachs Research, and Isabella Rosenberg, a foreign exchange analyst at Goldman Sachs, said. 

Additional structural differences and advantages to DeFi include unique products, faster pace of innovation, higher transparency, more efficiency and lower cost cross-border payments, it said. All of these factors will continue to create challenges for the DeFi community as it faces headwinds from policymakers concerned about consumer protection, the report said. 

Regardless, the narrative around DeFi has shifted from whether or not these decentralized products can work to how they can continue to grow and scale, they said. 

“The DeFi market has expanded dramatically since the middle of 2020 — roughly 10x on the most common summary measure,” according to the report.

Since the DeFi industry has exploded, the total value locked has increased 900% from under $10 billion during the first half of 2020 to nearly $100 billion today, the report said.

The growth likely is a product of yield and speculative activity likely also plays a role, they wrote. “But user adoption may also relate to longer-running trends including digitalization, globalization, and declining trust in centralized institutions,” they said. 

While some products are unique to the DeFi ecosystem, there are many overlaps to traditional finance, they wrote. “The main difference is that the marketplace is almost entirely decentralized: there are no banks, brokers, or insurers, only open source software connected to a blockchain,” they added. 

Overall, the innovations in DeFi show potential for adoption and disruption in existing financial systems, they said. “They also demonstrate a compelling use case for blockchains and cryptocurrency technology that should help support market valuations for these assets over time,” they added. 

Tags

Upcoming Events

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

morpho 2 graphic.png

Research

Utilizing a ‘DeFi Mullet’ approach, Coinbase’s Bitcoin-backed loans integration with Morpho demonstrates a powerful blueprint for CEXs to monetize dormant assets by expanding adoption of wrapped products (cbBTC, USDC) while also supporting native and/or preferred DeFi ecosystems (Base) which can further lead to downstream growth in onchain liquidity and increased utilization of the related assets.

article-image

The platform also rolled out 13 tokenized funds for institutions on the Connect platform

article-image

The company’s expanded lineup introduces new ETF products, as more and more issuers get into crypto funds

article-image

President Donald Trump announced a 10% levy on almost all goods and additional tariffs on so-called “worst offending” countries

article-image

Solana may be in “recomposition” mode, as new protocols put usefulness ahead of mere virality

article-image

The stablecoin issuer will have to contend with bigger players and the interest rates environment

article-image

The president reportedly was still working on his tariff policy plans late Tuesday evening