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Abstract

Decentralized Finance (DeFi) has been identified as an emerging technology for a transformative force in financial intermediation, introducing a trustless, programmable, and inclusive financial ecosystem. This paper identifies, show, and explores the integration of DeFi into traditional finance, focusing on how DeFi platforms are redefining financial intermediation and incorporates not only the financial perspective but also an IT-systems perspective, detailing architectures, data structures, and integration frameworks that enable collaboration between DeFi platforms and traditional financial institutions. The research identifies the limitations of current financial systems, evaluates the technical and regulatory challenges of integration, and highlights how DeFi innovations can increase efficiency, transparency, and inclusivity. Key components of this integration, such as smart contracts, decentralized lending, and interoperable frameworks, are analyzed along with their potential to overcome limitations in traditional finance. The paper concludes with recommendations for a mutually beneficial model combining DeFi and traditional finance to create a robust, secure, and inclusive global financial ecosystem.