As the gap between centralized and decentralized ecosystems deepens due to regulatory inconsistencies, organizations make substantial efforts to blend the concepts and promote innovation. Some centralized companies, such as PayPal, work with blockchain-based teams, like Ethereum, to create bridges for regular users to benefit from cryptocurrency payments and their advantages in safer and regulated channels.
Connecting the two worlds is necessary to bring the usefulness of immutability, transparency, and data security into centralized systems. Traditional finance can be slow and inefficient, which is why solutions like the Ethereum blockchain have the potential to improve it.
However, navigating the challenges of collaboration is difficult, so enterprises like Etherealize contribute to increased adoption. Let’s see what it can do to improve the financial system.
What Is Etherealize?
The Etherealize project targets the Ethereum ecosystem to build an innovative financial infrastructure for Wall Street institutions. The blockchain’s product arm will connect companies to the ledger by allowing them to design and deliver products and onboard assets, as well as educate them on the value of the technological platform.
The company envisions the future of finance on Ethereum as programmable, private, and global through strategies like tokenization and zero-knowledge technology. By recognizing the value of the Ethereum blockchain, Etherealize will be able to onboard some of the most tech-driven companies into the world of decentralization.
Will Companies Value Tokenization?
The tokenization process comprises issuing a digital asset of a real-world item, such as real estate or artwork. These assets can be in the form of cryptocurrency, central bank digital currency (CBDC), and non-fungible tokens (NFTs). The token can be used with specific protocols and features such as embedding codes to engage with smart contracts, interact with other assets on the blockchain, and automate transactions.
Financial service providers can benefit greatly from tokenization through:
- 24/7 availability for fast transaction settlement;
- Asset programmability and operational cost savings;
- Smart contract transparency based on self-executing instructions;
What About Zero-Knowledge Technology?
Zero-knowledge proof (ZKP) provides privacy by allowing one party to prove the knowledge of an asset without revealing much information through cryptography. This demonstrates that the information is valid, but does not expose the user or the data.
Several types of ZKPs serve various functions:
- Zk-SNARKs (succinct, non-interactive argument of knowledge) is an efficient method to generate a cryptographic proof;
- zk-STARKs (scalable transparent argument of knowledge) are faster ways for the prover and the verifier to interact;
- Bulletproofs (non-interactive zero-knowledge proofs) allow private cryptocurrency transactions without a setup.
While zero-knowledge technology would require highly specialized professionals in companies, they can ensure privacy-preserved datasets in transparent systems in a blockchain like Ethereum, which is what Etherealize will attempt to achieve.
Why Should Centralized Finance Blend In With Decentralization?
The fusion of centralized and decentralized financial systems is necessary to establish the basis of the future Web3. The limitations of the current economic system present considerable problems, such as a lack of accessibility or transparency, and issues in user control of their data. Therefore, centralized finance comes with massive security risks that hackers target easily since platforms don’t prioritize personal information as they should.
On the other hand, decentralized finance (DeFi) works with blockchain technology to provide transparency, security, and efficiency through programmable smart contracts, so intermediaries are not needed anymore. DeFi covers a broad range of services similar to centralized finance, but notable ones include:
- Peer-to-peer asset trading on exchanges;
- Digital assets users can borrow or lend.
- Borrowed funds transformed into amplified trading positions;
However, Blockchain Adoption Is Challenging
Introducing blockchain into centralized companies would allow access to smart contracts and other innovative facilities. Unfortunately, technical and organizational barriers make it difficult for companies to adopt blockchain without addressing pain points like limited talent or a lack of network effect.
Moreover, many organizations don’t trust the reliability and security of blockchain technology, nor do they trust the parties providing the blockchain network functionalities. That’s part of the steep learning curve in learning about the decentralized industry. In theory, blockchain is one of the safest networks due to cryptography, but it still needs maintenance and proper coding to work effectively.
In addition, blockchain interoperability is still under development. A ledger’s capacity to communicate with other networks and share assets is important for security reasons and innovation, but it’s currently hardly doable without an intermediary. Ideally, blockchains should be able to share, see, and access information between them without any third party for enhanced safety.
When Should We Expect Web3 To Go Live?
DeFi is only one part of the Web3 ecosystem, as the new era of the internet will include many tools and networks driven towards decentralization, trust, and immutability. Web3 will need a global infrastructure to support these emerging technologies, and the initial cost of adopting it might be too much for our possibilities.
Web3 will be considerably energy-intensive, especially when quantum computers enter the stage, so worldwide companies will have to invest in regenerative energy sources to cut down costs and enhance scalability.
Some experts predict that it might take another 20 years for Web3 to be deployed, but that doesn’t include quantum technology, which is even more complicated to learn and introduce to the masses. Considering how poor user experience is still a massive barrier to adopting high-tech, the focus should be on educating users and preparing talented people for the future.
While companies push for innovation and development, users must also be prepared for what’s to come, considering the final products will benefit them after all. Moreover, at some point in the future, regular users will have to get accustomed to using blockchain, cryptocurrency, and even quantum computers in their daily lives.
Are You Ready For Traditional Finance To Change?
Traditional finance helped communities achieve considerable innovations in technology, but it has now reached numerous limitations that call for decentralization. DeFi will provide products and services to the unbanked, allow the option to borrow and lend crypto, and tokenize real-world assets. Projects like Etherealize work hard to make this dream a reality by connecting centralized institutions to decentralized startups.
