Limitations and challenges of traditional finance

For a long time, the global financial system has relied on a centralized architecture, with core resources controlled by financial institutions such as banks, fund companies, and exchanges. Although this model has promoted the development of the global economy in the past, it is also accompanied by problems such as high entry barriers, low efficiency in capital allocation, and lack of transparency , making it difficult to adapt to the rapid development of the current digital economy.

Limitations of centralized architecture :

High entry barriers : Ordinary users find it difficult to obtain high-end financial services, and opportunities for wealth growth are monopolized by institutions.

Limited liquidity : Centralized institutions dominate the flow of funds and restrict market freedom.

Inefficient manual decision-making : Trading and asset management rely on traditional analytical methods, which make it difficult to accurately predict market changes.

Systemic financial risks : Centralized financial institutions are subject to operational risks and are easily affected by macroeconomic and policy controls.

According to a report by the International Monetary Fund (IMF), 1.7 billion people in the world still do not have access to basic financial services , mainly due to the high threshold of the centralized financial system and unfair credit allocation. The opacity of the global financial market has also led to a large number of financial crises. For example, the 2008 global financial crisis was caused by the opaque operations of centralized financial institutions and the accumulation of high leverage risks.

Faced with these challenges, the market urgently needs a more transparent, fair, low-threshold and efficient financial system , and DeFi (decentralized finance) is the starting point of this change, but there is still a problem of insufficient intelligence, which provides an opportunity for the introduction of AI technology.