Definition ∞ On-chain banking refers to the provision of traditional financial services, such as lending, borrowing, savings, and payments, directly on a blockchain network using smart contracts and decentralized protocols. Unlike conventional banking, these services operate without a central intermediary, relying instead on cryptographic security and automated code for execution and settlement. Users retain direct control over their digital assets, engaging in financial activities through self-executing agreements. This approach aims to offer greater transparency, accessibility, and censorship resistance.
Context ∞ The concept of on-chain banking is a frequent topic in crypto news, often discussed in relation to the growth of decentralized finance (DeFi) and its potential to disrupt traditional financial institutions. A key debate involves the regulatory challenges and consumer protection concerns associated with these permissionless financial systems. Future developments include the refinement of decentralized lending protocols, the integration of real-world assets into on-chain collateral, and the ongoing efforts to establish clear legal and operational frameworks for these novel banking models.
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