When we talk about finance, we are talking about trust, agreements, and guarantees. We entrust banks (and neobanks) to safeguard our savings, take care of our hard-earned money, facilitate transactions, and be there when we need additional financial services.
Unfortunately, this trust is a one-way street. The banking institutions operate as black boxes, giving minimal visibility regarding fund management, rationale, and account fees. We are forced to trust, with our questions often going unanswered. This leaves users feeling powerless and completely at the mercy of the bank’s good will.
We are, in essence, putting our financial lives in the hands of entities we know very little about. Sometimes, that can backfire spectacularly.
Deobanks (Decentralized On-Chain Banks) offer a radical departure from this frustratingly opaque model. They embrace transparency as a core design principle, not as some marketing slogan or discretionary policy, thus making financial activity inherently verifiable, auditable, and more accountable to their users.
This is visibility baked right into the very foundation of the system, and it works.
The Banking Black Box
By traditional banking, we mean both legacy institutions and their digitally-native neobank counterparts. Both are riddled with transparency issues that erode user confidence and create power imbalances that favour institutions over individuals.
Here’s where the lack of transparency is most acute:
- No insight into fund management: Banks pool your deposits, use them for lending, investing, and trading, and share none of the details. We know nothing of the risk, impact, or parties involved (e.g., HSBC was once caught money laundering for Mexican drug cartels)
- Unexplained decisions: Declined payments, account freezes, restrictions, and rejected loans. People rarely get a detailed explanation for these actions, leaving them feeling frustrated, distrusting, and powerless.
- Mysterious fee structures: Banks are notorious for complex fee structures, such as overdraft penalties, account maintenance fees, wire transfer charges, and more. The fees aren’t just hidden or confusing, but they may change at any moment and make it hard for people to budget.
- Lack of auditability: Users cannot independently audit a bank’s financial health or operational integrity. Even that concept might seem laughable to banks, but this level of transparency is the norm for Deobanks, where blind trust is not part of the deal.
The outcome of these transparency issues is a disconnect between banks and their users. Forced trust is not trust at all. It’s only because banking customers aren’t fully aware of alternatives that they continue to use unscrupulous banking institutions and expose themselves to centralized points of failure, mismanagement or negligence.
How Deobanks Are Transparent by Design
Deobanks offer a major step forward for the financial world, with these blockchain-based institutions conducting core operations on-chain, using the inherent transparency and immutability of distributed ledger technology to benefit their users.
Fundamental differences in their architecture reimagine the relationship between institution and user:
- Verifiable public transactions: Every transaction, from deposit and withdrawal to interest (yield) payment and loan disbursement, is recorded publicly on an immutable (unchangeable) blockchain. You can independently verify the validity of every transaction, a feature that threatens traditional banks, as trillions in global currencies have already moved on-chain.
- User-trackable account operations: Beyond tracking transactions, users can gain insights about the entire history of the decentralized platform, analyze on-chain data to see how their assets are managed, view how revenue is generated, and understand how profits are distributed.
- Smart contract automation: Self-executing agreements are written in code, deployed on the blockchain, and used to automate the core functions of a Deobank (like interest calculation, loan origin, and collateral management). Since they’re publicly auditable and immutable, they inspire confidence.
Note that Deobanks cannot change the terms of a smart contract once it has been deployed.
Trust is shifting.
Why This Model Builds Confidence, Not Dependency
Deobanks, like WeFi, believe that embedded transparency removes the need for blind trust. Instead of relying on faith or good will, empowered users can judge the platform for themselves as they shift from blind trust to verification.
Here are some things that Deobanks encourage:
- Self-auditing: Users can access all information on the blockchain to perform on-chain analysis and verify things for themselves, track transactions and investments, and assess the health of the Deobank.
- Openness: Deobanks promote transparency by making their code, data, and governance processes publicly accessible. This allows users to understand exactly how the system works and contribute to its development.
- Autonomy: More user control over funds and transparency means people have the information they need to really drive their own financial decisions and make the big choices that banks would never let them make. They can weigh up risk and reward for themselves.
As for the traditional financial institutions, the changing tide should serve as a wake-up call to behave better, as increased observability puts them in the spotlight. The emergence of Deobanks that operate within a virtuous cycle of transparency, accountability, and improved financial outcomes will only strengthen that.
How WeFi Makes Transparency User-Friendly
Summarised in one line: WeFi is a Deobank that exemplifies the principles of transparency by design. It implements this transparency in an ultra-modern way (on-chain), one that is powerful, user-friendly, and accessible to a wide range of users, regardless of their technical level.
Here’s how WeFi implements transparency in a forward-thinking way:
- All core financial activities are brought on-chain: WeFi offers lending, borrowing, yield generation (akin to interest), and more, all on-chain, so that everything is fully auditable and verifiable.
- Custodial flow trading: Even users who opt for custodial* flows, where WeFi manages their funds on their behalf, can trace exactly what happens with their funds. Traditional custodial banking would never think of delivering such transparency.
- No hidden fees: WeFi commits itself to full fee visibility. There are no hidden charges or fine print to worry about. Users receive full clarity from the start.
- Built-in analysis tools: WeFi provides intuitive tools that allow users to review, export, and analyze their financial activity. Tracking account balances, monitoring transaction history, and analyzing investment performance are all made simple, because transparency does not need to compromise ease of use or user experience.
*non-custodial wallets are due to launch soon.
No More Black Boxes
One day, opaque financial systems will be remembered as relics of a bygone era.
In the digital-first, user-centric world, transparency will be so ingrained in financial tools that it won’t even be considered a feature. It’ll just be normal. To get there, however, we must start using Deobanks like WeFi, which remove the need for blind trust and make everything verifiable.
Let us embrace this future and demand an end to the black boxes that have long shrouded the world of finance.
This article is not intended as financial advice. Educational purposes only.
