From Banks to Blockchain: The Rise of Institutional Adoption in Cryptocurrency
The DeFI Space and the Traditional Finance Industry throughout the years have quite frequently been at the wrong end of each other. The DeFI Space has been highly regarded by some Financial Institutions around the world while the others only value the Blockchain Technology to digitize the Traditional Financial System. This both combine to help drive the institutional adoption of the DeFI Space to the larger community so let us discuss the growth of adoption within the DeFI Space and can we really drive it up heading into 2025?
Synergy of Blockchain and Financial System
The emergence of Blockchain Technology has always been tied closely to Bitcoin as the origin of all the Digital Assets within the DeFI Space. Though many would point out the creation of Bitcoin as the platform to replace the Traditional Financial system, over the years its existence has evolved to complete the Financial system with its adoption being hailed as the next step to establish a digital future for the world along with Artificial Intelligence.
The year 2008 always came to mind as the crossover times where the World was going through one of the largest financial crashes in history and the effect was felt for years to come. The 2008 Great Depression exposed a lot of problems that exist with our traditional financial system such as the lack of transparency and heavy centralization which eventually left most people clueless about the risk along with the challenge that was about to unfold by the Banking System.
This laid the framework for creation of the Bitcoin Whitepaper and Blockchain Technology that was eventually released in the same year. Bitcoin, which was drafted as a peer-to-peer electronic payment system, allows its operation to be run by a decentralized network of miners who record the transaction within the Blockchain system. This Decentralized system was aimed to increase transparency and efficiency from the traditional financial system.
This Decentralized System which at first only gained appreciation from the Technology Sector soon would form a stark contrast to the current Centralized Financial System. Where the Centralized System adopts a very reserved information system that only encompasses its stakeholders, the Decentralized System adopts a transparent system where everybody can receive access to the information within the Network and is free to agree or disagree with any changes if necessary.
Over the years, this Decentralized Technology has continued to grow from strength to strength as more innovations and breakthroughs come around. The community managed to expand and encompass more people from the beginning of 2010s with just 8 Million people to a trajectory of 1 Billion people in 2030 as DeFI Space became the main norm in approaching the new decade. This led to many mainstream adoptions from Financial Institutions that are looking to digitize their systems.
One of the most common adoption of Blockchain Technology by the Financial Institutions has been on the concept of Stablecoins. Stablecoins, the concept of tokenizing real life assets or currency into the blockchain network, originated by Tether USD and now encompass many different commodities around the world. US Dollar backed Stablecoin remains the favorite with USDT becoming the most traded digital asset while Banks like J.P Morgan, Citi and HSBC have developed their own USD Backed Stablecoin.
Other common adoption of the DeFI Space revolves around the NFT sector as it reaches the peak popularity within 2021. NFT involves the use of blockchain to represent ownership of digital art, collectibles or platforms such as in Opensea or Rarible with Financial Institutions such as Visa and Mastercard allowing users to purchase NFTs with traditional payment methods and supporting NFT-related transactions.
Blockchain in the end of 2023 obviously faced a stern competition in Artificial Intelligence as Financial Institutions shifted their focus from creating decentralized networks to empowering automation within its operations. JP Morgan recently the big headlines within the Artificial Intelligence with the firm unveiling their own version of ChatGPT called LLM Suite to help the Wealth Management and Portfolio analysis
Part of this Shift toward Artificial Intelligence was the clear plan for adoption and the ease for compliance framework which support its growth. Blockchain Technology back to its original vision remains an important part in creating a better and transparent financial system for the future but the recent fall from its peak in 2021 and the wrong forms of its adoption, is currently not helping it to be on top of every institution’s mind.
Meanwhile all of this around, innovations and development keep going on from the inside of the DeFI Space with massive growth on Web3 and Real World Asset Tokenization. Many projects are gearing up for the last quarter of 2024 as many predictions and analysts forecast an upward trajectory within the DeFI Space. The growing portfolio Spot ETFs should bring the Financial Institutions and the DeFI Space closer while Adoption over the coming years slowly rises.
Driving up Institutional Adoption
Blockchain Technology has been the backbone for DeFI Space dating back to its existence and so far it has proved to be effective and efficient in handling worldwide transactions. It has the perfect balance of security in providing the user privacy while still maintaining transparency for all the stakeholders to be aware of the happenings within the network. This Blockchain Technology has given birth to the amazing concept of Decentralization and Tokenization that have expanded the capabilities of our digital world.
In order to drive up the Institutional Adoption of the DefI Space, it is important to match the amazing capabilities of Blockchain Technology with the right adoption. The Concept of Tokenization instead of being just used to produce Digital Arts or Virtual Land should instead be utilized for Database Management System so Filings about Customer Information and Legal Frameworks can be secured within the network and operations can be much quicker.
The Concept of Decentralization on the other hand can be implemented to the Secure Server for Financial Institutions so the operations can continue without any flaws. This will also Secure Private Information about the Customer and Institutions while General Information can be accessed by its worldwide users through all time. The Concept of Synthetic Assets and RWAs can be integrated into the Asset Management of Major Financial Institutions to protect the physical assets backing it up.
Ofcourse, all of this will happen in due course once there is more clarity on the regulatory framework around the world and seamless adoption can then be established. Right now, the only way we can drive up institutional adoption is by bringing back the optimism to the DeFI Space by harnessing the technology and its capabilities in the right way. Meanwhile throughout these uncertain times, we need to keep on encouraging the right innovations while simultaneously stabilizing the current state of the DeFI Space.
We from the Nagaya Technologies Pte. Ltd are proud of the development of the DeFI Space as there is enormous potential that lies within the Blockchain Technology paired with Sustainability being the key idea in its application. Nagaya becoming the World’s First Hybrid Digital Asset continues our commitment to expand real-life adoption of Blockchain Technology Sustainably. Intrigued to know more about Nagaya, you can visit us at www.nagaya.co
Or you can obtain your Nagaya now through the Latoken Platform at https://latoken.com/exchange/NGY_USDT
