Decentralised Finance: The Next Frontier in Global Banking

15th January 2025

Decentralised finance (DeFi) is challenging traditional banking systems. This article explores how DeFi could reshape the global financial landscape in 2025, offering new opportunities and challenges.

As 2025 begins, the financial world is on the cusp of a transformation. Decentralised finance (DeFi)—the movement that uses blockchain technology to replace traditional banking intermediaries—has gathered momentum, challenging the very fabric of the global financial system. Through smart contracts and peer-to-peer transactions, DeFi promises an alternative that sidesteps the restrictions of centralised banks, offering a world where anyone with an internet connection can access the financial services they need. However, while the potential is vast, the road to 2025 is riddled with both opportunity and challenge, where the course of DeFi’s future may be shaped by forces as unpredictable as the characters in Sarah Grand’s The Beth Book.

In The Beth Book, Grand presents the narrative of a young woman, Beth, who seeks to rise above the oppressive constraints of her environment. Her struggle against a system of expectations reflects the challenges faced by DeFi today—emerging as a force that seeks to break free from the conventional structures of finance. Much like Beth, DeFi is positioned as a rebel against the status quo, an idea that challenges the established order of banking and finance. Yet, as Beth’s journey illustrates, the road to empowerment is never free from complexity. For DeFi, the complexity lies not only in technological barriers but also in the growing pains of adoption and regulation that will determine whether it can truly reshape the global economy.

One of the core principles of DeFi is decentralisation: removing the middlemen that have traditionally held sway over financial transactions. By using blockchain technology, DeFi operates on a distributed ledger, allowing peer-to-peer exchanges without the need for a central authority. This decentralisation echoes the radical individualism found in the works of Victorian writer Mary Elizabeth Braddon. In Lady Audley’s Secret, Braddon’s characters often navigate a world where societal norms are questioned and the boundaries between right and wrong become blurred. DeFi, like Lady Audley, has the potential to upend the conventions of the financial world, offering users the chance to regain control over their economic futures. However, as Braddon’s narrative shows, such upheavals come with their own set of risks, often lurking in the shadows, where trust and stability are in short supply.

In practical terms, DeFi could have a profound impact on asset tokenisation, an area where blockchain technology allows the fractional ownership of assets. By 2025, tokenisation could become a commonplace feature of the financial landscape, allowing anyone with a smartphone to invest in things like real estate, fine art, or even a stake in a private company. This could democratise access to wealth in a way that was previously unthinkable, offering ordinary people opportunities to invest in assets typically reserved for the wealthy. However, in much the same way that the characters in R. S. Surtees' Handley Cross stumble across new and unfamiliar territory, the new world of DeFi is fraught with uncertainty. Tokenisation, for all its promise, could also expose investors to greater volatility, particularly as the value of tokenised assets may fluctuate wildly depending on market demand, liquidity, and external economic pressures.

DeFi’s integration with traditional finance could take many forms in 2025. While some proponents argue that DeFi will replace conventional banks, a more likely scenario is that it will evolve to coexist with traditional finance, creating a hybrid system. In this way, it mirrors the complex relationships seen in the works of George Meredith, particularly in his novel The Egoist, where characters struggle with their individual desires and societal expectations. DeFi, much like the protagonist of The Egoist, seeks to assert its independence, but it may ultimately find itself inextricably tied to the established structures that it seeks to dismantle. In this hybrid system, traditional financial institutions may continue to offer services like loans, while DeFi could enable faster and cheaper transactions through decentralised platforms. It is not a matter of complete replacement, but of a reimagining of what financial systems can be.

However, such a hybrid future will not come without its challenges. A key obstacle for DeFi in 2025 will be its scalability. While blockchain technology has shown promise, it still struggles with issues like slow transaction speeds and high fees. Ethereum, the most widely used blockchain for DeFi, has been particularly prone to congestion during periods of high demand. Layer-2 solutions, such as rollups, promise to address these issues by processing transactions off-chain and then settling them on the main Ethereum network. Should these solutions succeed, DeFi could become a serious competitor to traditional financial systems. However, much like the characters in J. Sheridan Le Fanu’s Carmilla, whose supernatural abilities bring both allure and danger, DeFi’s ability to scale could introduce new risks. If its rapid growth outpaces its technological infrastructure, the system could experience unexpected crashes or hacks, undermining its credibility.

The regulatory landscape will also play a crucial role in shaping the future of DeFi. Governments around the world have begun to pay closer attention to DeFi’s rise, with many contemplating how to regulate decentralised platforms while still preserving their unique characteristics. This tension between regulation and freedom can be seen in the works of the lesser-known writer Henry Kingsley, whose novel The Recollections of Geoffrey Hamlyn explores the delicate balance between social order and personal liberty. For DeFi, the challenge lies in ensuring that it remains a tool for financial empowerment without falling prey to abuse by bad actors or being stifled by overbearing regulation. In 2025, we may see new frameworks emerge that provide clarity and stability to the DeFi space, allowing it to grow while also addressing concerns around fraud, money laundering, and security.

As we look to the future, the success of DeFi will ultimately depend on its ability to attract mainstream users. Despite its potential, DeFi remains a niche market, with many people either unaware of its existence or deterred by its complexity. To thrive, DeFi will need to offer a seamless and user-friendly experience that rivals the simplicity of traditional banking apps. This process of simplification will be key to ensuring that DeFi does not remain the preserve of crypto enthusiasts and technologists but becomes accessible to the broader public. In much the same way that the seemingly inaccessible world of modernism in literature was eventually brought into the mainstream, DeFi will need to overcome its intellectual and technical barriers if it is to realise its full potential.

At the same time, DeFi’s future success will also hinge on its ability to navigate the inherent contradictions within its ecosystem. Just as the characters in Carmilla face a constant battle between their desires and the forces that seek to control them, DeFi will need to reconcile its drive for decentralisation with the need for security and regulation. For all its promise, the system remains a work in progress—one that will require careful thought, development, and collaboration between developers, investors, regulators, and users.

In conclusion, while the future of DeFi in 2025 holds significant promise, it remains an uncertain path. The technology behind DeFi offers the potential for a radically different financial system—one that is more inclusive, transparent, and efficient. However, just as the protagonists in the works of Sarah Grand or Henry Kingsley face moments of doubt and struggle in their quest for change, so too will DeFi. The coming years will reveal whether it can overcome the obstacles in its path and achieve the kind of transformation its advocates envision. As with any revolution, the road ahead is fraught with both danger and opportunity, and only time will tell whether DeFi will fulfil its ambitious promises or fade into the annals of speculative ventures.