The financial landscape as we know it may all change soon, thanks to what happened with GameStop not too long ago. To understand why this is, we first have to acknowledge that socio-economic institutions are becoming increasingly digitalized, and it is only a matter of time before the entire world follows suit. This is also a result of individuals in many societies demanding dramatic change, which most likely resulted from years of repetitive systems that led to monotony. So, what had transpired with GameStop is actually not that surprising at all, and is in fact, the next natural step towards a paradigm shift as far as the global financial landscape is concerned. It was the same as when Bitcoin first burst onto the scene, as well as what had happened with NFTs and, most recently, Dogecoin.
Furthermore, and perhaps most importantly, the GameStop incident highlighted just how unfair the system actually is, with retail investors often at an extreme disadvantage and legacy institutions benefitting enormously.
Retail investors fed up
Robinhood, E-Trade, TD Ameritrade, Fidelity and Charles Schwab are all examples of brokers which take part in the ‘payment for order flow’ practice, which may result in a process known as front running. Simply put, this practice involves firms such as the likes of Citadel Securities paying a fee to the broker in an effort to gain access to the different orders that had been placed by various retail traders.
Afterwards, these orders (when bundled together) tend to provide the market makers with information regarding the movements of future prices, albeit on a short-term basis. As for the retail traders, the benefits involve the conducting of trades that are free of any commissions.
Is the future completely DEX & DeFi based?
Both DeFi and DEX have played an important part in transforming the financial industry in recent years. As blockchain technology is often decentralized in nature, resistance to censorship is often conferred. This hence enables the formation of applications where actors like Robin Hood have the ability to restrict traders. Essentially, DEX offers its users the opportunity to take part in their respective business-related activities and transactions in a fairer and unbiased way.
Furthermore, it had been the various inequalities on the part of the big-time corporations and financial institutions that had ultimately resulted in the formation of decentralized finance. Market analytics, market makers that are automated in nature, improved access, and less intervention are just some of the reasons why more individuals are moving away from the traditional financial systems and into the era of DeFi, as had been proven by events such as the GameStop story.