Decentralized finance, or DeFi, first took off around 2018, and is regularly hailed as a technology that breaks apart the traditional stack of financial services, and replaces it with a composable, Lego-like alternative. This is a fair description. But it also obscures the fact DeFi actually unifies many elements of finance, says Arjun Sethi, the co-CEO of Kraken and the featured guest on the newest episode of Fortune’s Crypto Playbook vodcast (available on Spotify, Apple, and YouTube).
In a wide-ranging discussion on Kraken’s latest tokenization efforts, Sethi made the point that banks have historically sought to create walled gardens of financial services—storing assets, selling, lending and so on. They will typically work with favored partners to do this, but the customer has no say over who handles many of the behind-the-scenes transactions.
This changes with DeFi, said Sethi, who pointed out that the technology is a series of open protocols that lets customers control who does what with their assets. These protocols work together seamlessly so, while these tools are decentralized, they also unify the financial stack in an unprecedented way.
“What you are able to do is to defragment what you have across all these traditional financial markets,” said Sethi. “I think that’s the piece that people lose when we talk about decentralized finance.”
While DeFi tools offer enormous opportunities, they have largely remained beyond the realm of ordinary consumers due to the complexity of accessing them. This is beginning to change, however, as companies like Kraken are building interfaces that let consumers use DeFi in a manner that feels more like a traditional bank or brokerage.
Kraken’s recent offerings include xStocks, which are tokenized shares of popular companies like Apple or Tesla. Sethi says xStocks have already found huge appeal in markets like South Africa and Argentina because DeFi technology lets Kraken make them available without the fees tagged on by middlemen—fees that can make purchasing the stock cost 10% or 15% higher than the underlying price.
The DeFi element of xStocks also mean that the tokenized shares can be bought and sold not just on Kraken’s site, but on any platform that incorporates the appropriate protocols—a dramatic change from traditional brokerages.
xStocks is currently available in numerous overseas markets and in Europe, and will be offered in the U.S. by early next year. Right now, Kraken is offering the shares of around 50 companies, but Sethi says this will soon be expanded to 100 and then 1000 popular stocks.
In the interview, conducted at Fortune’s Brainstorm Finance in Park City, Utah, Sethi also explained the technology that powers tokenization, and how we can expect DeFi to expand in coming years.
You can find the whole interview with Arjun Sethi, as well as the first five episodes of Crypto Playbook, here.
