Ethereum is often described as the antithesis of traditional financial power. In fact, the goal of Ethereum is not to subvert the traditional financial field, but to supplement and improve it. In the future, there will be more intersections between these two systems.
Neutrality in a multipolar world
Ethereum is not an invisible currency substitute and anonymous shadow bank. At present, the geopolitical stability brought about by "America First" is being weakened, and political turmoil in major economies is increasing. In a multipolar world, the financial system desperately needs a credible institution.
The reason why the Ethereum system is difficult to break is mainly due to its highly decentralized consensus level. While there are concerns that a PoS-turned Ethereum will become more centralized, the addition of new nodes is becoming more decentralized over time.
Solving the principal-agent problem
The "crypto winter" caused by centralized platforms is not so much the failure of cryptocurrency as it is the defect of traditional finance. In this case, the traditional principal-agent problem becomes more serious due to factors such as loose regulation and centralized power.
Traditionally, the governance of the agency problem mainly relies on strict regulations, while Ethereum effectively alleviates the agency problem through non-trusted smart contracts and distributed ledgers.
In the future, Ethereum and its extended blockchain may penetrate into the traditional banking and asset management fields. From savings accounts to retirement investment portfolios, investors can self-custody their own assets through untrusted smart contracts, and at the same time Cooperate with regulators so that tokenization with fiat currencies can proceed smoothly. In these respects, Ethereum does not contradict regulation, but enhances regulation.
Finally, countries around the world will pay more attention to the technical specifications of smart contracts, which is consistent with their needs for liquidity reserves. The future of Ethereum is not completely permissionless, and identity-based authorization may become a standard, but this seamless experience will feel almost unregulated to users.
As the number of central bank digital currencies proliferates, censorship will be a major concern, and there will be plenty of political power to push for global legislation against arbitrary freezing of digital assets. In short, Ethereum has great potential to greatly reduce fiscal injustice, but its role in regulating countries is limited.
new agency adoption
It may still be far away to talk about the future of Ethereum, but its ecology is gradually taking shape. Although DeFi has been exaggerated in 2021, it has also brought a lot of innovation. Today, this technology can be used to create a variety of decentralized markets and tokenized financial instruments. What is missing is connectivity to the wider financial system.
In the next few years, perhaps the world will see a flood of tokenized securities, all of which start with stable fixed income. With the upgrade of Ethereum Shanghai, ETH pledge will continue to attract more funds and will gradually become an important strategic asset. Recently, the United States has adopted a series of legal enforcement measures, which has slowed down the growth rate of digital currency, but digital currency will still dominate in the future.
Summarize
The surge in regulatory pressure on cryptocurrencies, especially DeFi, means that a new era of integration of cryptocurrencies and traditional finance is coming.
In the Ethereum ecosystem, those agreements that cannot or cannot adapt to environmental changes will eventually be eliminated, and agreements that can be well integrated into the existing financial system will be widely adopted, and the changes brought by Ethereum to traditional finance just began.