The blockchain fans have always favored decentralization, sharing the information, and equal opportunities – defining principles of 2008, which changed the vision of global financial systems. Nevertheless, the current purchase by Wall Street giants is in danger of dismantling the 16 years of architecture establishing itself on these pillars. JP Morgan, Standard Chartered, HSBC, Goldman Sachs, etc. , have gone all in on blockchain with the SEC approving the spot Bitcoin and Ether ETFs and BlackRock moving to tokenize. Yes, institutional support increases legitimacy and helps grow the market but at the same time what are the trade-offs.
They mentioned that the level of institutional involvement in high-tech industries began to rise.
These market development are undoubtedly beneficial to some and afford a degree of recognition to the builders who have dedicated time and effort to maintain this market. Nevertheless, the involvement of global organisations imply a rising threat to replicate the similar unbalanced hierarchal system from where blockchain broke free from initially. Also, higher participation from traditional finance entails more rigid regulations and well-ordered policies from nation-state institutions undermining decentralization and flexibility of our blockchain networks. So, why bother?
Traditional finance Pedestal
These were the very financial behemoths who just a while ago were disparaging it as an irrelevant and ineffective novelty. To provide some background, in 2017, the chief of JPMorgan Chase penned that Bitcoin is a fraud, In this particular period of intense skeptical approaches, such as that of financial governance in the U. S. paid little to no attention to – or even perhaps shunned – this entire sphere. But now, as the two begin to warm slightly to the reality of Wall Street ETFs’ possibilities, we appear to be positively desperate to draw attention to their coming. Some of the major private and public players must be doubted with the future of the blockchain ecosystem as for the years, they have failed to offer a stringent, comprehensible, and feasible legal mechanism.
Many regulatory hurdles have stemmed from it while innovation stagnation has also been witnessed.
The matter of whether it is a security or a commodity remains in debate up to now, endless legal cases and a migraine for larger exchanges in the US. Such rules and guidelines are obscure, and have created an environment of mass jurisdiction hopping in a bid to seek legal relief for innovation elsewhere. With effective and efficient technologies, such as ZK proofs or modular systems, given that the blockchain industry is progressing at a fast pace, it equally strangles innovative productivity for want of stuffing a technical square peg into a round form of regulation.
Minimum Government, Max Freedom
Regarding interoperability, the tradition financial system is most comfortable when addressing centralized connectors that could be managed, taken over, or even prosecuted. However, as learnt in the history of Web3, centralized bridges are always on the prowl to set additional rules to control the protocols in the connected systems, and they are most unsafe since they are centralized. This was in display when the Ronin Bridge was hacked in the year 2022, and North Korean hackers calmed up to $625 million. This is one of the many incidents that emphasize the existing threats of such centralized factors within the blockchain space.
Thus, the task remains to keep creating permissionless and entirely trustless systems, which cannot be seized and turned off by the state, a regulator, or an owner. The currently proposed street-level, decentralized, or open-source zero-knowledge (zk) bridges won’t be a panacea but they promise and are more fair. These bridges are distributed, anonymous, and autonomous, and thus, they can function with as little governmental oversight and as much liberty as possible as they can perform the movement of assets and the creation of proofs of such local and economical movements.
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