Four Reasons Institutions Are Interested in Decentralized Finance (DeFi)


Four Reasons Institutions Are Interested in Decentralized Finance (DeFi)


Decentralized Finance (DeFi) intends to create an open, permissionless, and transparent financial system, using blockchain technology and smart contracts to remove third parties from transactions. While retail investors have been at the forefront of adoption, the landscape is evolving, with more institutions entering the space. 

Why are institutions interested in DeFi trading? 

Access to hard-to-reach assets and projects 

DeFi often provides access to thinly traded assets and projects that may not yet be available on centralized liquidity exchanges (or CeFi for centralized finance). These assets are often overlooked by traditional venues due to their lack of mainstream recognition. By tapping into DeFi liquidity, institutions can diversify their portfolios and potentially capitalize on emerging trends and innovations earlier in a project's lifecycle.

Deep liquidity opportunities

Adding DeFi venues to an institution’s routing table can be an effective way to diversify sources of liquidity in pursuit of best execution. For example, DeFi platforms offer access to deep liquidity pools and a wide range of assets. Institutions may leverage this liquidity to execute large trades at potentially better prices than on CeFi platforms.

Reduced reliance on intermediaries

The decentralized nature of DeFi may appeal to institutions looking to reduce reliance on centralized intermediaries. By utilizing DeFi platforms, institutions can trade and interact directly with smart contracts, potentially eliminating the need for middlemen and reducing transaction costs. Moreover, DeFi offers instant on-chain settlement, helping to minimize counterparty risk and enhance efficiency in the trading process.

Unique opportunities

In addition to trading on DEXs, activities made possible by DeFi such as staking, lending, and liquidity provision have become increasingly attractive to institutions as new opportunities to deploy their assets.

How does Talos support DeFi access?

Through Uniswap Labs' Trading APIs, Talos clients have enterprise-grade access to some of the deepest liquidity in DeFi, enabling them to trade many different assets, in a familiar order book format. Talos plans to integrate with other decentralized trading venues in the future.

In addition, Talos has integrated with Figment, the leading provider of institutional infrastructure for Ethereum staking, making staking rewards of shared clients viewable on the Talos platform. 

“As the DeFi landscape continues to evolve, Talos will look to integrate with partners who can provide clients with the institutional-grade standards and safeguards they’re used to from traditional finance." Talos Senior Product Manager, Anton Deshchenko  

In summary

Institutions are turning to DeFi for its potential to provide deep liquidity, diverse assets, and innovative interactions not available in traditional finance. Institutions are increasingly recognizing the opportunities DeFi presents and are seeking to navigate their way into this new landscape.

Disclaimer: This material is for informational purposes only and is only intended for sophisticated institutional investors, and is not (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, (ii) intended to provide accounting, legal, or tax advice, or investment recommendations, or (iii) an official statement of Talos. No representation or warranty is made, expressed or implied, with respect to the accuracy or completeness of the information or to the future performance of any digital asset, financial instrument or other market or economic measure. The information is believed to be current as of the date indicated and may not be updated or otherwise revised to reflect information that subsequently became available or a change in circumstances after the date of publication. Talos and its employees do not make any representation or warranty, expressed or implied, as to accuracy or completeness of the information or any other information transmitted or made available. Investing in cryptocurrency comes with risk. Certain statements in this document provide predictions and there is no guarantee that such predictions are currently accurate or will ultimately be realized. Prior results that are presented here are not guaranteed and prior results do not guarantee future performance. Recipients should consult their advisors before making any investment decision. Talos may have financial interests in, or relationships with, some of the assets, entities and/or publications discussed or otherwise referenced in the materials. Certain links that may be provided in the materials are provided for convenience and do not imply Talos's endorsement, or approval of any third-party websites or their content.

Request a demo

Request a demo

Find out how Talos can simplify the way you interact with the digital asset markets.