Trends in Web3 and Finance Unveiled at DAS

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Last week, I had the privilege of attending the DAS conference in London. Industry leaders and innovators gathered to discuss the latest trends shaping the future of finance. The week was filled with insightful panels, thought-provoking keynotes, and engaging discussions.

It was clear that everyone in the industry was feeling much more optimistic about the year ahead. Startups are now attracting more interest from VCs with funds to deploy, while enterprises are implementing a variety of new solutions. The announcement of Blackrock tokenizing its first fund surprised everyone and further fueled the positive sentiment.

Among several interesting trends, I would like to highlight three that I believe will develop further throughout the year.

1. Traditional Institutions are Building

Traditional financial institutions, once cautious observers of blockchain technology, are now actively exploring its potential applications. Across the board, three key use cases continuously stood out: custody, payments, and tokenization.

• Custody is a no-brainer for many traditional banks. They already provide traditional financial assets custody so providing custody of crypto assets is a natural path for many. Many do so by partnering with Digital Custodian software companies. We can expect this trend to continue.
• Tokenization, a big opportunity for many in traditional finance, earned the stage once more. While many traditional institutions are driving tokenization projects (for example, bond and gold tokenization), the announcement from Blackrock has moved the dial-up. The fact that Blackrock (such a big enterprise) is now driving tokenization will send a strong signal to market. In case you missed, Blackrock issued its first fund on Ethereum (a public blockchain) using the tokenisation platform called Securitize and leveraging BNY Mellon as the Custodian.
• Payments are a key use case, especially in emerging markets. While the consensus is clear that digital payments are the future, the debate still rages on regarding which form will prevail: Stablecoins, Bitcoin, XRP, or CBDC?

2. The Rise of Zero Knowledge Proofs (ZKPs)

ZKPs are one of the areas of focus for 2024.

This technology will be essential to providing privacy and security in blockchain. In simple terms, ZKPs allow institutions to check certain information without having to access the data. So, for example, a bank would be able to see if a new client was over 18 years old without having to see their ID or even their date of birth.

One key challenge of leveraging public blockchains for finance use cases is that they are fully transparent (by design) without a privacy and identity layer. Traditional institutions will need to be able to perform control and compliance checks and have some privacy layer for their transactions in order to use public blockchains.

ZKPs solutions will enable Financial Institutions to obtain a privacy and identity layer in public blockchains and so could be a game changer for the industry.

3. Navigating Interoperability

I noted this trend in discussions with colleagues and experts (off-stage). It is clear that multichain is the future, but it is still unclear how to achieve it and which startups and experts are building the solution.

If you are new to this space, one simple way to understand this concept is to think about internet browsers. There isn’t just one internet browser; in fact, we have the opposite. Users have the ability to choose from a variety of browsers, such as Internet Explorer, Google, Brave, etc. However, moving between browsers is a seamless experience.

In the Web3 world, we have several blockchains (public, private, consortiums, etc.), but there is no interoperability between them. Similarly, most blockchains do not have interoperability with traditional legacy systems. But for solutions to take off in financial services, we will need to have interopability across blockchains and legacy systems. Users will need to be able to move assets, identity and ownership seamless across systems.

Final Thoughts

Throughout the week, it was clear to me that blockchain holds immense promise for innovation and disruption in financial services. However, the events in the last few years (yes, FTX was one of them) made a number of players more cautious and retreated into building mode. 2024 will be the year for many to showcase what they have been building internally and create partnerships across the market.

Until next time

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This is a new and exciting space, so ideas and perspectives may change as we learn more and technology improves.

Any views or opinions represented are personal and belong solely to the author and do not represent those of people, institutions or organisations with which the author may or may not be associated in a professional or personal capacity unless explicitly stated.