Why bring traditional financial assets on chain? Tokenization for regulated Real World Assets benefits in comparison with TradFi centralised accounting systems:
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Efficiency and Cost Savings: Blockchain technology enables the creation of decentralised, distributed ledgers that can be more efficient than traditional centralised systems. It is especially important for start-ups from traditional finances who can not afford to build expensive centralised accounting systems. Transactions on a blockchain can be processed faster and at lower costs, reducing the need for intermediaries and streamlining various financial processes.
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Transparency and Security: Blockchain provides a transparent and tamper-resistant record of transactions. This transparency can enhance trust among participants and reduce the risk of fraud. The cryptographic nature of blockchain also enhances security, making it more resistant to hacking and unauthorised access.
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Faster Settlements: Traditional financial transactions often involve multiple intermediaries and take time for settlement. Blockchain allows for near-instant settlement of transactions, reducing the time and cost associated with clearing and settlement processes.
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Smart Contracts: Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically enforce and execute the terms when predefined conditions are met. This can streamline complex financial processes, automate certain tasks, and reduce the need for intermediaries.
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Global Accessibility: Blockchain operates on a decentralised network, making it accessible from anywhere in the world. This global accessibility can be particularly beneficial for financial institutions involved in international transactions, as it can reduce the time and costs associated with cross-border payments.
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Improved Compliance: Blockchain can help financial institutions comply with regulatory requirements by providing a transparent and auditable trail of transactions. This transparency can make it easier for regulators to monitor and enforce compliance.
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Innovation and Competitive Advantage: Embracing blockchain technology allows traditional financial institutions to stay competitive in a rapidly evolving financial landscape. It opens up opportunities for innovation and the development of new products and services that leverage the advantages of blockchain.
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Tokenization of Assets: Blockchain enables the tokenization of various assets, such as stablecoins, real estate, stocks, and other financial instruments. This can make it easier to trade and transfer ownership of these assets, increasing liquidity and reducing friction in the traditional financial markets.
Ledger system breach or points of centralisation in decentralised systems
Yesterday's Ledger exploit which drained $ 484K of user's funds one more time confirms that we have as many vulnerabilities as there are points of centralisation in decentralised systems.
What happened yesterday is that the hacker supposed to be a former Ledger employee inserted malicious code into the GitHub library for Connect Kit, a widely-used piece of blockchain software maintained by the Ledger crypto wallet.
It means that you might have 100% bulletproof and secure decentralised blockchain, but if the wallet which you use depends on centrally managed software there is a risk of exploiting this point of centralisation. This is what happened with Ledger and it might happen with any other centrally managed wallets.
To be 100% secure today you need your own blockchain node with a native open-source wallet application which is not user-friendly but completely reliable.
There may be room on the market for decentralised wallets which have good UX and do not have points of centralisation confirmed by external code audit.
10 Trends for 2024, add yours in comments!
In the vivid landscape of decentralized technology trends for 2024, a tapestry of innovation and transformation unfolds, shaping the future of the digital realm. Here, let's explore the seven key trends that paint this picture:
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RWA (Real World Assets): The once abstract world of decentralized finance now extends its reach into the tangible realm. US Treasuries, bonds, and real-world loans find a digital expression through tokenization. A symphony of ERC standards, such as the ERC-3643 for permissioned tokens and the ERC-1400 Security Token Standard, orchestrates the secure and compliant representation of these assets on the blockchain.
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Regulated DeFi: The boundaries between traditional finance and the decentralized realm blur as institutional financial organizations and asset managers step into the decentralized finance arena. This marks the inception of TradFi and DeFi convergence, forging a path toward a regulated and institutionalized decentralized financial landscape.
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Web3 Social: The social landscape undergoes a decentralized revolution. Web3 Social emerges as decentralized social networks take center stage. In this new era, users are not just contributors but also earners, as attention, likes, and reposts are valued commodities exchanged directly between users, epitomizing the mantra of "Like & Earn."
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Decentralized Identity Solutions: A new era unfolds where users take control of their digital identities. Blockchain-based decentralized identity solutions gain prominence, allowing individuals to manage and authenticate their personal information securely. This trend enhances privacy and security, paving the way for a self-sovereign identity landscape.
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Uniswap v4 Launch: Uniswap, a trailblazer in decentralized exchanges, introduces its fourth iteration, accompanied by the development of a robust hooks ecosystem. This launch extends beyond mere transactions, incorporating the principles of regulated DeFi, further solidifying Uniswap's role in shaping the decentralized financial landscape.
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Decentralized Finance Derivatives Boom: A surge in decentralized derivatives markets takes place within the DeFi space. Platforms offering decentralized options, futures, and other derivative products gain popularity, providing users with more sophisticated financial instruments in a decentralized and permissionless environment.
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DePIN (Decentralized Physical Infrastructure Networks): The digital and physical worlds converge as DePIN emerges, defining blockchain protocols that construct, maintain, and operate physical infrastructure in an open and decentralized manner. This trend paves the way for a new era of collaborative, community-driven infrastructure development.
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ZK Everything: Zero Knowledge technology becomes the backbone of decentralized applications and protocols. ZK-SNARKs and their counterparts permeate the ecosystem, ensuring privacy, security, and scalability. This trend heralds a new era of trustless interactions and data integrity, fostering confidence in the decentralized landscape.
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Account Abstraction and Self-Custody Wallets Mass Adoption: The complexities of managing private keys give way to a more user-friendly and secure experience. Account Abstraction (AA) technology leads the charge, providing a seamless user experience and heightened safety. This sparks mass adoption of self-custody wallets, empowering users to take control of their digital assets with confidence.
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Cross-Chain Interoperability: A network of interconnected blockchains emerges, fostering collaboration and interoperability on a global scale. Cross-chain solutions become the architectural bridges, enabling assets and data to seamlessly traverse different blockchain networks. This trend symbolizes a united and collaborative approach to building a decentralized future.
As we navigate the decentralized landscape of 2024, these trends intertwine to create a dynamic and inclusive ecosystem, where the digital and physical worlds seamlessly coexist, and the promise of decentralized technologies reaches new heights.
What did I miss? Add in comments!
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BTC 41K DONE! Pre-halving hype started! The next Bitcoin halving is estimated to occur around April 2024.
EigenLayer and shared Ethereum consensus
In Vitalik’s post from 2023 May 21 “Don't overload Ethereum's consensus” vitalik.eth.link/general/2023/05/21/dont_overload.html there is an idea of “using the Ethereum validator set to secure other chains”. Why not use existing Ethereum validators for supporting consensus for other chains? The benefits for both sides are obvious. Ethereum validators get an additional source of revenue as a payment for protecting other chains. New chains do not need to look for or create from scratch reliable validator network, besides consensus supported by existing Ethereum validators is supposed to be cheaper than a dedicated validator’s network because Ethereum validators could share their costs with not one but a few supported chains including Ethereum itself.
This very simple idea is extremely complicated in execution. And EigenLayer Protocol has taken on this challenge. In its white paper protocol calls this service of supporting other networks’s consensus - restaking and supported networks - AVS (actively validated services). AVS examples include sidechains based on new consensus protocols, data availability layers, new virtual machines, keeper networks, oracle networks, bridges, threshold cryptography schemes, and trusted execution environments. Quit an extensive list of possible protocol users and participants.
The key problem which should be resolved by EigenLayer at every moment is to make sure that the so-called Cost-of-Corruption (CoC) is always much higher than Profit-from-Corruption (PfC). To give you an example, the protocol should avoid situations when a blockchain network with TVL (Total Value Locked) of 10 million USD is protected by validators with staked assets (ETH in our case) for let’s say 1 million USD. In this situation CoC < PfC (1 < 10) and for this particular set of validators it makes perfect economic sense to break the rules of consensus and steal 10 million USD while losing 1 million USD of ETH as a result of slashing by EigenLayer. I did not find a clear answer to this problem in the white paper except to increase as much as possible the restacked amount of ETH by participating validators. Other solutions include “creating an open-source cryptoeconomic dashboard, which will allow AVSs built on EigenLayer to monitor whether the set of operators participating in their validation tasks is entrenched across many other AVSs or not”.
It should be noted that EigenLayer is in development for now so it is not in full production mode. The idea of shared consensus is very attractive and I think we will see more protocols trying to resolve this problem in the near future.
Enjoy the EigenLayer white paper and hope we will retake some ETH in the near future!
There is no 100% reliable centralized crypto exchange in the world! 🌎
Centralization = Censorship
DeFi is the future of finance!
Maverick - Decentralised AMM Protocol where liquidity follows the price
After the Uniswap v3 launch the concentrated liquidity brought higher profitability for liquidity providers at the cost of going out of price range so that your liquidity is no longer used in swaps and you as a liquidity provider do not earn any fees.
Maverick AMM with its novel approach offers a solution for this problem so that your concentrated liquidity literally follows the price if you are out of range.
According to Maverick AMM white paper four modes are built into the protocol:
- Mode Right - liquidity moves with price as price increases, but doesn’t move when price decreases
- Mode Left - liquidity moves with price as price decreases, but doesn’t move when price increases
- ModeBoth - liquidity moves with price as it increases and decreases
- Mode Static - liquidity does not move
The New Maverick AMM approach definitely deserves attention and will help LPs be profitable as a simple static LP-providing approach is hardly profitable.
As far as I understand from the white paper moving liquidity comes at a transaction cost which is paid by swappers, not liquidity providers which is good for LPs.
Enjoy white paper and try Maverick AMM protocol.
