15 Months After FTX, Trust In Web3 Technology Has Never Been Stronger

The rise of institutional interest in digital assets and blockchain technology in recent months has come as a big surprise to many. After the epic crisis that precipitated FTX's bankruptcy in November 2022, the cryptocurrency market seemed to have a terminal illness. It seemed that trust in all digital assets and the new Web3 technology had been irrevocably damaged.

Fast forward 15 months and bitcoin prices are now hitting higher highs, thanks to the approval of bitcoin ETFs by the US Securities and Exchange Commission (SEC) in January. The Blackrock bitcoin ETF was the Fastest growing ETF in history by reaching the $10 billion mark in funds under management in less than two months, and is now praised by many.

Blackrock CEO Larry Fink has become the poster boy for digital assets by declaring that “the next generation of markets, the next generation of securities, will be the tokenization of real-world securities and assets,” just after a 2022. BCG report stating that the potential to tokenize global illiquid assets will be an estimated $16 trillion opportunity by 2030.

Black Rock has Just Launched a new tokenized fund that offers a stable value of $1 per token and pays daily cumulative dividends directly to investors' wallets in new tokens each month. The fund invests 100 percent of its assets in cash, U.S. Treasury bills and repurchase agreements. The fact that the product has been launched on the public Ethereum network is an important milestone in the market.

Last month HSBC issued a $750 million (HKD6 billion) digital native green bond for the Hong Kong government on its Orion platform, the largest digital bond deal ever with over 50 global investors and in four different currencies (HKD, CNH, USD, EUR).

This recent digital bond launch follows a series of digital bonds issued by the European Investment Bank (EIB) over the past 18 months with financial institutions such as Euroclear, Goldman Sachs, SocGen, Santander, BNP Paribas and HSBC, to name a few.

Institutions are now embracing this new generation of technology and the market opportunities it brings. Measures by financial institutions and their fintech partners to move digital asset projects from PoCs to production Smart contracts and distributed ledger technology (DLT) started making headlines last fall.

While the move to digital asset and commodity money market funds such as ETFs demonstrates confidence in digital assets for retail clients, it is sovereign debt issued on DLT that is seen as the true "first step" into the markets. capitals. This is the enabler of the next generation of digital financial market infrastructure (dFMI) for states to help digitally transform aging industrial economies into service-based economies and bring them into the digital space race.

How did digital asset markets achieve such rapid change in less than two years?

A relationship that burns slowly

Considering the time it takes for large corporations to adopt this new technology, it must be recognized that the current interest in blockchain is far from new. Much of the activity happening now has been in development for much longer than the short 15 months that have passed since the FTX collapse.

The genesis of bitcoin may have enabled the launch of digital assets to the world, but the key trigger for business interest in blockchain was the launch of Ethereum in 2015. At SIBOS 2015 in Singapore, Swift's annual conference for financial institutions, the big message was “blockchain is the future of finance,” delivered to the CxOs standing.

Within a year, reports emerged that JPMorgan had been developing a permissioned implementation of a new platform on Ethereum called Onyx. The surprising popularity of NFTs in 2021 marked another turning point for enterprise adoption as brands like Nike and Starbucks began making strategic inroads into Web3.

Over the past decade, public blockchain infrastructure has developed to the point that developers are beginning to better address legacy issues such as scalability and privacy. Nearly a decade later, the 2015 proclamation “blockchain is the future of finance” is starting to resonate.

Although there is still much work to be done, the progress made has certainly been a key factor in increasing business confidence factors, even as markets have remained volatile.

Bentzi Rabi, Co-Founder and CEO of an Institutional Crypto Trading Platform Useful, agrees, “Historically, poor user experience in blockchain has been much more debilitating to enterprise adoption than crypto market volatility. Now that we are starting to overcome some of the long-standing issues such as scalability and interoperability, the focus is on improving the user experience and eliminating friction.

“The ultimate measure of trust and adoption is when blockchain integrations and digital assets of all kinds simply flow seamlessly alongside established business processes, generating measurable improvements.”

From public to private with ZK

A fundamental change that has brought blockchain and business closer together is the advances made in privacy technology in recent years. The concept of trust in the Web3 sphere has always focused on the ability to verify facts without trust, which effectively means publicly on a blockchain.

The emergence of Zero Knowledge (ZK) Solutions has changed this, allowing “trustless” verification of transactions and data without the need to transmit it on the blockchain network.

The most developed use case for ZK technology is currently rollups, used by Layer 2 platforms like Polygon and Immutable X to make Ethereum more scalable. While scalability is undoubtedly valuable to businesses and institutions, privacy applications of technology offer broad scope to make business processes more efficient while reducing compliance and operational expenses.

Mickaël Canu, executive director of Thank you, who is developing a zkEVM platform compatible with Ethereum and Polkadot, explains: “Today, companies collect large amounts of personal and corporate data at a very granular level, which presents enormous challenges in terms of storage, processing, compliance and cybersecurity. ZK technologies offer multiple ways to address the problem.

"Privacy-focused L2 platforms combined with trusted execution environments can help protect the most business-critical data from exposure. Identity solutions mean that personal data, which typically only needs to be verified and not necessarily collected ( such as with a KYC check), it could be verified using a zero-knowledge proof instead of a company taking care of the documents and information.”

The Bank of England announced last year which was partnering with identity and payments company Nuggets to develop an identity and privacy layer for a future digital pound based on ZK technology. He Buenos aires city It has also developed a digital identification protocol in a similar way. Initiatives like these effectively incorporate blockchain and ZK technology as a layer of trust within established and familiar processes and entities.

Taming the AI ​​beast

A key external factor will also play a role in cementing blockchain's role as a trusted business technology: the rise of AI. The proliferation of AI tools and content has been so rapid that it has raised questions about the integrity of intellectual property regulations and the transparency of algorithms.

Blockchain technology offers a way for AI companies to close some of the gaps, introducing transparency into their data and algorithms through a public ledger. Last year, enterprise blockchain company Casper Labs announced it was launching a collaboration with IBM to develop a solution for transparency and “auditability” in AI. It aims to provide visibility into how AI models use data across industries, including finance, healthcare and retail.

William Simonin, president of ta-daA platform for ethical data collection and AI training that pays users to complete microtasks, believes blockchain sets the challenge for AI companies.

"The emergence and popularization of AI-based assistants, such as Chat GPT, have opened the eyes of the general public to the power and immense usefulness of AI. In light of this, it becomes imperative to rethink and optimize our methods of data collection. This is essential not only to support the rapid expansion of artificial intelligence in the coming years, but also to maximize its potential in the service of innovation and progress," says Simonin.

The relationship works both ways: AI can help improve trust in cryptocurrencies and digital assets by detecting trends and issues in the market that humans may miss.

Herbert Sim, COO of the trading platform websea, says: “Trust and information asymmetry are a big problem for the average cryptocurrency trader. Given the enormous complexity inherent in markets, it is beyond human ability to keep track of all the variables and risks at play.

"Artificial intelligence tools are helping to level the playing field, processing large amounts of data to intelligently detect and assess risks and make recommendations or execute trades automatically based on set parameters."

It may seem to some that the current institutional interest in Web3 technology is driven by another cycle of technological hype, although it's pretty hard to beat AI on that front after the last year. It appears that smart money is building a foundation of trust in digital finance with this more established technology.

Maybe, and just maybe, smart money is beginning to form part of a new social contract of decentralized finance with society, and is proving that it is capable of surviving the political and economic volatility that has been unleashed so far. of the 21st century. Rest assured, there is much more of this story to come.