For the better part of the 20th century, the financial world remained largely exclusive to only the upper classes and the wealthiest of people. Yet advancements in technology and social attitudes have created a new paradigm of financial inclusion. With the mass digitization of our world in the first few years of the 21st century, the once-excluded people  are now more included. Not only has increased financial inclusion translated into a wave of social good, it has also spawned lucrative opportunities for a generation of tech-native engineers and entrepreneurs. Nowhere is this new wave of possibility more pronounced than in the decentralized finance (DeFi) space. 

The total locked value (TVL) in DeFi,  used as a benchmark of the sector’s growth, first exceeded $1 billion in May 2020. Since then, DeFi has exploded, with the TVL expanding more than tenfold across the various lending, derivatives, payment solutions, decentralized exchanges (DEX) applications that make up the sector. While the sharp rise in TVL points to a validated concept with tremendous potential, DeFi still remains inhibited from reaching the fullest capabilities.

Consumers are gravitating towards DeFi applications, attracted by the chance to take an active role in an alternative financial system that opens the doors of capital to average people.These consumers, once limited to earning an income out of labor alone, can now take part in opportunities once reserved for high net worth individuals and institutions only.who were previously denied the opportunity to participate in capital prod, rather than just their labor. The DeFi system brings more inclusivity to the financial world and provides more liquidity and opportunity for citizens all over the world, including in developing countries, a path to participate in capital markets and upward social mobility.

Despite growing in parallel to the traditional financial system (TradFi), DeFi and Wall Street are not mutually exclusive.Such applications have the potential to expand the existing financial world beyond what could have been imagined just 10 years ago. For example, 25-year healthcare administration and tech veteran Pradeep Goel proposed using DeFi networks to manage medical device financing and leasing, an industry worth over $450 billion per year. This is only one of numerous industries that stand to benefit from a shift towards decentralization. 

The potential is there for the taking, but the technology is not. 

The financial world is so intricately interconnected that in order to function optimally on a distributed ledger, the underlying technology must be capable of sustaining massive volumes and provide stability to decentralized apps. Existing centralized technologies bear that capacity regularly, processing tens of thousands of transactions per second. Distributed ledger technology, however, does not have this capacity yet, but innovative developments like sharding afforded blockchain developers offer stronger processing functionality. 

Nowhere are these processing constraints felt more than in the domain of high-frequency trading (HFTs.) In traditional markets, human traders have long since been replaced by smart agents capable of orchestrating split-second trades at scale. Meanwhile, DeFi is largely limited to the Ethereum chain, which is capable of a maximum of 15 transactions a second for the entire network. For Wall Street traders used to lightning quick execution speeds, using DeFi could be compared to interacting with Windows 95 or dial-up internet.

Blockchain platforms, such as Ethereum, EOS, Tezos, and Hyperledger, each have their own benefits, but as an ecosystem, the chains remain entirely separate. This is problematic, because it limits the potential for applications to maximize scalability and functionality. So, for example, a DeFi app running on Ethereum (most of them do) operating a payment app might find gas costs expensive, but EOS offers cheaper gas costs. Without interoperability, the developer can't access EOS's cheaper gas costs while the app is operating on an Ethereum chain.

More importantly, though, in order for DeFi to thrive, consumers need to be able to transact across multiple chains, like the non-blockchain, centralized financial system allows. DeFi  infrastructure currently doesn't. 

Imagine if restaurants or merchants only accepted one credit card or banks couldn't transfer money between each other. How would international payments be executed? How would any trading be done? Today, DeFi faces the same problem: Without interoperability, it's one step forward, three steps back.

There are numerous solutions for interoperability on the market at the moment, like Polkadot, Cosmos, or Wanchain, but it remains to be seen whether these solutions will truly foster the kind of cooperation needed to materialize a robust DeFi system. For true interoperability to flourish, the tools to connect between chains should be as general-purpose as possible, allowing projects to adapt code to their own use-cases and create connections based on demand. Instead of being paralyzed by choice when deciding which blockchain to use, developers should be able to combine the relative strengths of each chain into superior products. Users could then take actions across platforms with a single, generic tool. 

One of the cross-chain benefits to users and DeFi apps is the expansion of liquidity pools from single chain to multiple, which could provide greater security to traders, amplify financial app scalability, improve price discovery, and raise capital formation. 

Much like our early ancestors and civilizations who warred over resources, personal pride, and territory, the blockchain community finds itself stuck in a similar paradigm of tribalism and boastful uncooperativeness. Tribalism is counterproductive to developers, as it severely limits the tools at their disposal and the communities they can reach. More than that, tribalism is counterproductive for DeFi participants as it restricts their search for opportunity based on the activities of a single chain. Communicating and uniting to find common-ground solutions and baking interoperability into core technology could ultimately sow the seeds for a blossoming DeFi system.