TradFi, short for Traditional Finance, refers to the traditional financial system that is centered around centralized institutions such as banks, investment firms, and insurance companies. It is the opposite of DeFi, which stands for Decentralized Finance, a movement to provide financial services using decentralized technology and blockchain-based systems.
TradFi is characterized by its centralized nature, with financial institutions having a large amount of control and power over the financial system. It is based on trust in these centralized institutions, and the services provided, such as loans, savings accounts, and insurance policies, are typically regulated by governments and other central authorities.
In contrast, DeFi is based on trust in decentralized technology and smart contracts, with the goal of creating a more inclusive and accessible financial system that is not controlled by any central authority. DeFi services are available to anyone with an internet connection, regardless of location or credit history, and they offer a new level of transparency, security, and accessibility.
In summary, TradFi refers to the traditional financial system centered around centralized institutions, while DeFi refers to a movement to provide financial services using decentralized technology and blockchain-based systems. TradFi is characterized by its centralized nature and trust in centralized institutions, while DeFi is based on trust in decentralized technology and smart contracts.
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