Tech
The Year Blockchain revolutionizes traditional asset management with zkEVM and institutional-scale liquidity aggregation
2024 will be the year that transforms traditional wealth management. Institutional investments in blockchain technology have been expected for years, but they are about to become a reality.
Key capabilities, particularly the development of the zero-knowledge Ethereum Virtual Machine, or zkEVM, are capable of enabling the tokenization of real-world assets and laying the foundation for a fundamental transformation of the global financial system.
Institutions need mainnet-level security, infinite scalability, and enormous liquidity potential. With advances in development tools and mathematically proven security measures, the necessary components are finally assembled to deliver on this promise.
This, in turn, will lead to mainstream adoption of blockchain.
Transparency through chain abstraction
zkEVM, which is capable of executing smart contract transactions in a zero-proof environment, has firmly established itself in blockchain infrastructure. Now institutional investors can tap into a proven ecosystem of Ethereum-based blockchains, with its strong guarantees of security, decentralization and transaction transparency, at a much lower cost, fast settlement times and with potentially unlimited scalability.
The picture of Web3’s success is to create a “chain of chains”, in essence, a seamless user experience across the entire ecosystem. Part of the liquidity advantage comes from the ability to integrate different applications ranging from gaming, DeFi and licensed institutional platforms. Each of these requires custom blockchain architectures with different levels of permission, privacy, cost, security, and incentive design.
By abstracting technical chain design decisions, developers can build on a secure infrastructure and focus on optimizing for a single use case. They are able to elevate the capabilities of the application layer so that any blockchain interaction occurs transparently. The end game involves an expanded blockchain ecosystem where institutional investors gain access to the high liquidity of the entire Ethereum ecosystem in addition to the security benefits of zero-knowledge transactions.
Institutional-scale liquidity aggregation
zkEVM facilitates enormous liquidity potential by enabling near-instant settlements, enabling seamless transactions and cross-chain liquidity transfers. A user can withdraw liquidity from one chain and execute a seamless decentralized exchange (DEX) transaction on another chain.
Institutional scale requires institutional levels of liquidity. In the near future we will see not only tokenization products introduced into the ecosystem but also more sophisticated financial instruments such as derivatives. For this to happen, major technological innovations are required, largely driven by the aggregation of all the liquidity in the space within a single layer that can efficiently manage these assets.
Blockchain technology offers 24-hour trading and access to previously inaccessible assets and vehicles, but institutions require customizable chains and integration with legacy systems poses significant challenges. zkEVM features introduce a level of security and integration potential that changes everything.
Recently, Hamilton Lane and Brevan Howard they became users of the new real-world asset tokenization platform Libra, developed with the Polygon Chain Development Kit (CDK). Polygon CDK is permissionless software that allows developers to create new chains with varying degrees of decentralization, security, and functionality, allowing customization for developer compliance needs such as matching users with suitable financial instruments, be it a hedge fund, collateralized loan or other investment product.
As we move forward, the key ecosystem enablers for institutional investors are improving the developer experience and providing security backed by mathematical proofs. This will reduce operational costs and allow you to integrate legacy systems to support compliance and security requirements.