"On-Chain" vs "In-Chain": Exploring the Integration of Blockchain and TradFi

Recently, a senior executive in the Blockchain industry delivered a keynote speech titled "On-Chain" and "In-Chain" at a major blockchain technology conference. The speech focused on the comparison between the TradFi market and the crypto finance market, trends of interconnectivity, and the applications of blockchain technology. Here are the main points of the speech:

Comparison between TradFi Market and Crypto Finance Market

In the past decade, the development of Blockchain technology has been constructing a new financial market system - the crypto financial market. Unlike the traditional financial market, which uses fiat currency as the unit of account, the crypto financial market adopts distributed ledger technology, using cryptocurrencies as the unit of account. These two market systems are gradually showing a trend of interconnectedness.

2025: Five Ways of Interconnectivity

1. Stablecoins: It is expected that the transaction volume will reach $60 trillion in 2024, serving as the main channel connecting fiat currencies and cryptocurrencies.

2. ETF: Converting on-chain digital native assets into off-chain securities, facilitating traditional investors in allocating cryptocurrency assets.

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 companies to raise funds and go public in the future.

5. Licensed financial institutions: An important channel for the interconnection of two financial markets.

The Concepts of "On-chain" and "In-chain"

Assets exist in two states:

1. On-chain: Registering real-world asset data on a distributed ledger to gain global liquidity.
2. On the chain: Digital native assets, such as Bitcoin, exist on the Blockchain itself.

Three Ways to "On-chain"

1. Data on chain: Transferring data from the Web2 world to the Blockchain through oracles.
2. Hardware devices on the chain: such as DePIN (Decentralized Physical Infrastructure Network).
3. Asset Tokenization: This refers to DeFi (Decentralized Finance), 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 Two-Tier Value of Distributed Ledger Technology (DLT)

1. Improve existing business models: such as optimizing bank fund settlement and clearing processes, reducing cross-border payment costs.
2. Innovative Business Models: Like Bitcoin, it has created a new asset class - tokens - based on DLT.

Tokens as Crypto Assets

In the world of Blockchain, tokens are not only units of permission or data but also a new class of financial assets. Based on cryptography, Blockchain, and self-managed digital wallets, tokens have become the representatives of crypto assets.

Distributed Ledger Technology under Compliance Requirements

With the interconnection between TradFi and the crypto financial markets, new requirements for distributed ledger technology have emerged, including compliance, KYC (Know Your Customer), AML (Anti-Money Laundering), and CFT (Counter-Financing of Terrorism). Licensing, compliance, and regulation will become increasingly important in the future.

Conclusion

Blockchain technology and distributed ledgers are merely tools; what truly matters are the applications and new types of assets created based on these technologies. These innovations will become an indispensable part of users' asset allocation.