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Open Finance (OpenFi)

Open Finance (OpenFi)

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OpenFi, short for "Open Finance," is a financial framework that integrates traditional finance (TradFi) with decentralized finance (DeFi).

What Does OpenFi Mean?

OpenFi, short for "Open Finance," is a financial framework that integrates traditional finance (TradFi) with decentralized finance (DeFi). It aims to offer users greater control, flexibility, and innovation in managing their funds and data. OpenFi brings decentralized finance into real-world use through self-custodial, interoperable, and often open-source tools.

Self-Custodial Accounts and KYC

Unlike traditional banking systems, where access to accounts is tightly linked to Know Your Customer (KYC) protocols and regulatory compliance, OpenFi accounts are decentralized and self-custodial. Users retain full control over their accounts and assets, regardless of restrictions from traditional financial providers. While interactions with TradFi systems like payment rails and banking services may require KYC compliance, the core OpenFi accounts themselves do not.

Permission-Free Innovation 

One of OpenFi's main features is that anyone can innovate without needing permission. This open approach lets new entrepreneurs compete with big companies, leading to better services and lower costs. Users benefit from a growing range of financial products offering improved features, lower fees, and better experiences.

Evolution from Open Banking

OpenFi draws inspiration from the principles of Open Banking, which emphasizes transparency and customer control over financial data. However, due to slow adoption by banks, consumer trust issues, fragmented implementations, and regulatory and technical challenges, Open Banking has yet to fully realize its goals. OpenFi builds on these principles by adding DeFi innovations and giving users more control.

Bridging the Gap With Smart Wallets 

The OpenFi ecosystem includes various products and services that bridge traditional and decentralized finance. Smart wallets are fundamental tools that let users manage their assets with full control but without some of the issues that have plagued legacy crypto wallets like "gas" fees and seed phrases. These wallets break down barriers between cryptocurrencies and everyday finance, making it easier for people to use crypto in their daily lives.

Onchain Crypto Cards

A significant development in OpenFi is the emergence of onchain crypto cards (or self-custodial crypto cards), which allow users to pay for everyday items with crypto while merchants receive payments in fiat currency. Unlike CeDeFi crypto cards—which are traditional payment cards with fiat balances topped up from crypto—onchain crypto cards directly use onchain assets. This enables users to spend directly from their self-custodial accounts, eliminating the need for centralized custodians and adhering to decentralization principles.

Comparing OpenFi and CeDeFi  

While both OpenFi and Centralized Decentralized Finance (CeDeFi) aim to integrate elements of DeFi and TradFi, they differ significantly in their approaches to custody and control. CeDeFi utilizes smart contracts but maintains asset control through centralized custodians, offering a hybrid system that combines DeFi's accessibility with centralized finance's regulatory oversight. OpenFi, in contrast, emphasizes the self-custodial management of funds and data, giving users absolute control over their assets. It seeks to make onchain assets on par with TradFi assets, allowing people to manage them seamlessly while increasing transparency and removing hidden fees.

Pathway to Mainstream Adoption

OpenFi has the potential to transform how people use cryptocurrencies, moving beyond speculative trading to practical, real-world applications. This shift shows that crypto is maturing, focusing on real value for users and creating solutions for actual financial needs. By making digital assets useful for daily transactions and integrating them seamlessly into financial lives, OpenFi helps people leverage the benefits of blockchain technology without the complexities traditionally associated with crypto. This evolution means the crypto space is maturing, concentrating on giving users real benefits and fostering innovation that addresses actual financial needs.


Author: Hannes Graah, Founder and Builder of Zeal

Hannes Graah is the Founder and Builder of Zeal, the digital wallet designed for your entire financial life. Having previously worked as VP of Growth at Revolut, Hannes has a deep understanding of building user-friendly financial tools. Additionally, an eight-year tenure at Spotify bolstered his expertise in scaling operations and managing diverse growth initiatives. Hannes is equipped with an entrepreneurial mindset and a strong ability to scale company operations and assorted growth projects. 


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