"On-chain" vs. "In-chain": The Integration of Encryption Assets and TradFi

On October 31, at SmartCon 2024, a blockchain industry expert delivered a speech on the topic of "on-chain" and "in-chain." Here is a summary of the main content of the speech:

Over the past decade, blockchain technology has driven the development of the encryption financial market, and this emerging market is gradually achieving interconnection with the TradFi system. The integration of the two markets mainly occurs through the following ways:

1. Stablecoins: The trading volume is expected to reach $6 trillion in 2024, serving as an important channel connecting fiat currencies and encryption.
2. ETF: Converting on-chain digital assets into off-chain securities to facilitate participation for TradFi investors.
3. RWA (Real World Asset Tokenization): Tokenizing traditional assets on the blockchain through blockchain technology.
4. STO (Security Token Offering): It may become a new way for Web3 enterprises to raise funds and go public.

Assets in the blockchain world exist in two states: "on-chain" and "in-chain". "On-chain" refers to registering real-world asset data on a distributed ledger to gain global liquidity; "in-chain" refers to digital native assets, such as Bitcoin, that inherently exist on the blockchain.

The three main ways to "go on-chain" include:

1. Data on chain: Transfer Web2 data to the blockchain through oracles.
2. Hardware on-chain: For example, DePIN (Decentralized Physical Infrastructure Network) will put hardware devices on-chain.
3. Asset Tokenization: This refers to DeFi (Decentralized Finance), which tokenizes TradFi assets.

Distributed Ledger Technology (DLT) creates value on two levels:

1. Improve the efficiency of existing business models, such as reducing cross-border payment costs.
2. Innovate new business models, such as new asset classes like Bitcoin.

In the world of DLT, tokens are not only units of permission or data but also a new type of financial asset—encryption assets. These assets are based on cryptography, blockchain, and self-managed digital wallets.

With the integration of TradFi and encryption finance, the demand for compliance is also increasing. Future blockchain solutions need to meet regulatory requirements such as KYC (Know Your Customer), AML (Anti-Money Laundering), and CFT (Counter Financing of Terrorism).

Finally, the speaker emphasized that what users really need are the applications and new types of assets brought by blockchain technology, not the technology itself. Blockchain and distributed ledger technology are merely tools; the real value lies in the new types of assets and applications they create, which will become an indispensable part of users' asset allocation.