"On-chain" and "In-chain": Exploring the Integration of Two Financial Market Systems

Recently, at a blockchain technology summit, an industry expert conducted an in-depth discussion on the theme of "on-chain" and "in-chain." The speech revolved around the comparison between traditional financial markets and cryptocurrency financial markets, the trend of interoperability, and the application of distributed ledger technology (DLT).

Comparison Between Traditional Financial Markets and Cryptocurrency Financial Markets

In the past decade, the development of blockchain technology has actually constructed a brand new financial market system - the cryptocurrency market. Unlike traditional financial markets that use centralized accounting and fiat currency as the unit of account, the cryptocurrency market is based on distributed accounting, using cryptocurrencies as the unit of account. These two seemingly independent systems are gradually showing a trend of interconnectedness.

2025: Five Ways to Achieve Interconnectivity in Financial Markets

1. Stablecoins: It is expected that the trading volume will reach $6 trillion in 2024, becoming the main channel for connecting fiat currencies and cryptocurrencies.

2. ETF: By securitizing on-chain digital assets, it facilitates traditional investors' participation in cryptocurrency investments.

3. RWA (Real World Asset Tokenization): Tokenizing traditional assets on-chain through technological means.

4. STO (Security Token Offering): More cases of Web3 companies directly financing their listings in the form of tokens are expected to emerge in the next six months.

5. Licensed financial institutions: an important bridge for the interconnection of two markets.

Distinction Between the Concepts of "On-chain" and "In-chain"

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

Three Ways to "Go on Chain"

1. Data on-chain: Using oracle technology to move data from the Web2 world onto the blockchain.

2. Hardware devices on-chain: Achieved through a decentralized physical infrastructure network (DePIN).

3. Asset On-Chain: This refers to decentralized finance (DeFi), which tokenizes financial assets from the real world.

The ultimate goal of these on-chain methods is to achieve asset tokenization, allowing assets to gain liquidity on a global scale.

The Dual Value of DLT

1. Improve the marginal benefits of the existing business model, such as increasing the efficiency of bank fund settlement and reducing cross-border payment costs.

2. Innovative business models, such as the birth of Bitcoin, have created a whole new asset class.

In the AI era, tokens have also become units of data and valuation, reflecting the application value of DLT in different fields.

Token: Emerging Cryptocurrency Asset

In DLT systems, tokens have evolved into a new class of financial assets - crypto assets. These assets are based on cryptography, blockchain, and self-managed digital wallets, providing users with greater asset autonomy.

Development of DLT under Compliance Requirements

With the integration of traditional finance and the cryptocurrency market, DLT systems face new challenges, particularly in compliance, KYC (Know Your Customer), AML (Anti-Money Laundering), and CFT (Counter Financing of Terrorism). Future DLT applications will need to meet regulatory requirements across different scenarios and jurisdictions on a decentralized basis.

Conclusion

As someone once said, "What customers want is the hole in the wall, not the drill in their hand." Blockchain technology is merely a tool; what truly matters is the value and applications it can create for users. In the future, new types of assets based on blockchain are expected to become an indispensable part of users' asset allocation.