Opinion: Jason Delays, Blockchain ecosystem in Zama

Despite the recent revival (DEFI) Finance (DEFI), most of the capital in classic finances remain out of reach. Most blame the scalability, regulation or penniless UX. A real blocker is much more fundamental: no confidentiality. Solve and trillions will be unlocked.

At the top of December 2021, the total DEFI value (TVL) reached an amazing $ 260 billion. However, enlarge, and this number begins to seem miniature, especially when the global financial system transfers trillions every day. The very exchange of strangers sees over 7.5 trillion of commercial dollars per day, and the global bond market is worth over $ 130 trillion.

DEFI has affected the disaster 2022-2023. Credit protocols have shown that power is maintained and the TVs are growing again. Defi, however, still outlines the area of ​​global capital, not because it cannot scale, but because it lacks classic financing cannot live.

Encryption technology draws the highest obstacle

In the case of most institutions and players with high net value, confidentiality is not negotiable. However, each deposit, loan and payment are, however, on open public blocks. This level of transparency can delight cryptographic purists, but for the most stern capital it is Kdealbreaker.

Therefore, for many, they think about unlocking the promise of Defi-Bez friction, open, institutional finances-Nadal seems distant. The last development of technology, especially fully homomorphic encryption (FHE), suggests that reality can be closer than it seems.

After gaining more attention, the mainstream is not just academic curiosity.

Privacy technology enables data processing without decryption. Sensitive information remains encrypted even when using. Institutions can be introduced to DEFI to make their transactions and positions private.

Independent loans and more

Consider unread loans, because it is probably one of the most common exploit of exploit for FHE in DEFI and reflects how most loans work in classic finances. While classic finances are rarely based on excessive value, DEFI does, blocking assets to manage risk, which limits its scope.

Fhe changes the equation. Here’s how it can work: firstly, the user provides an encrypted loan or knows the customer’s data (KYC) with a protocol. The bright contract then checks the data using FHE – for example, asking: “Is their creditworthiness above 700?” – Everything, without any deciphering. If it is approved, the user can borrow without setting security and confidentiality. If they do not pay back, the lender may gain the right to decipher specific data to take legal action in offchain.

Either way, institutions assessing risk and issuing a loan can finally enter the world onchain without disclosing the position or disclosure of customer data.

These types of privacy loans make DEFI more elastic, integration and adapted to classic finances. Unspiled loans are just the beginning. You can go further with FHE, rebuilding the foundations of DEFI borrowing.

Let’s consider whether to take part in today’s leading protocols and rebuild them with confidential ERC-20 in the core. Now put on encrypted credit results, hidden loan amounts and protecting the maximum value of extraction (MEV). This is not just a function update – this is a fresh primitive for loans.

Related: SingularityNet and Mind Network bring encryption to AI agents

In the case of institutions, this would lead to private pulms of collateral, in which positions remain confidential, with the option of loans based on loans. Retail users could access without security loans, protected against bots at the front and MEV. In the case of loan reports, it would offer a path to transform into confidentiality systems that can ultimately scale into trillions without prejudice to the barelessness.

Public locks have always been better than private blockchains when it comes to openness and interoperability. Private chains, however, traditionally offered greater confidentiality, making them more attractive to institutions that must maintain data privacy. In the case of FHE, public chain chains can match private chains in terms of confidentiality without giving up the basic strengths.

Challenges of the solution, but there is no reason to give up

All of the above sound great, but if DEFs really rock and bring trillions, which have still got stuck in classic finances, not only private credit results and confidential credit pools are needed. You should create a completely fresh foundation, and first there are several design challenges, such as liquidation. The encrypted values ​​will complicate triggers. FHE supports comparisons, but discreetly notification of liquidators may require encrypted events or offchain relays.

Credit systems are another area of ​​complexity. Structivating encrypted kyc and failure to perform obligations to legal and technical enforcement; The challenge is balancing confidentiality and responsibility.

MEV protection also requires further work. The amount of transaction hiding is a good beginning, but pairing encrypted quantities with a party or time blockades for further unclear patterns may be needed for full defense.

It also affects liquidity; Cweth is divided from a wrapped ether (Weth), but gives encouragement or liquid packaging, they can fill this gap. From the UX point of view, the decryption tools must be displaced in the wallet.

Finally, the jurisdiction is a unique problem. Public prices may indicate values, but the matches compatible with FHE can solve it later.

None of them is a head at all, just puzzles. They should be resolved before reaching the full potential of the defia. Institutions will not appear if every movement is public and retail users should not give up privacy or excessively collecting to get a loan. With the development, rapidly moving, perhaps DEFI efficiency, Swiss confidentiality and real loans-it is almost at your fingertips.

Opinion: Jason Delays, blockchain ecosystem in Zama.

This article is used for general information purposes and should not be and should not be treated as legal or investment advice. The views, thoughts and opinions expressed here are themselves and do not necessarily reflect or represent the views and opinions of Cointelegraph.