"On-chain" and "In-chain": The Integration and Development of Two Asset States

Recently, at an important blockchain industry conference, a senior expert delivered an excellent speech on the topic of "on-chain" and "in-chain". The speech covered the comparison between traditional financial markets and cryptocurrency financial markets, the trend of interconnectivity between the two, and the application prospects of blockchain technology in asset management and financial innovation.

The speaker first pointed out that the past decade has witnessed the rise of a new type of financial market system—the cryptocurrency market. Unlike traditional financial markets that use fiat currency and centralized accounting, the cryptocurrency market employs distributed ledger technology and cryptocurrencies as units of account. These two seemingly independent systems are gradually moving towards interconnectivity.

Interconnectivity is mainly achieved through the following ways:

1. Stablecoins: The trading volume is expected to reach $60 trillion by 2024, becoming a major connection point between fiat currency and cryptocurrency.
2. ETF: By using off-chain securitization, traditional investors can invest in crypto assets without the need to manage private keys.
3. RWA (Real World Asset Tokenization): Tokenizing traditional assets on the blockchain using blockchain technology.
4. STO (Security Token Offering): Provides new financing and listing channels for Web3 companies.
5. Compliant financial institutions: An important bridge connecting the two markets.

The speech mentioned that assets exist in two states: "on-chain" and "in-chain". "On-chain" refers to registering real-world assets or data onto a distributed ledger to obtain global liquidity; "in-chain" refers to digital native assets like Bitcoin that inherently exist on the blockchain.

The ways of "on-chain" are becoming increasingly diverse, including:

1. Data On-Chain: Bringing Web2 data onto the blockchain via oracles.
2. Hardware devices on-chain: such as DePIN (Decentralized Physical Infrastructure Network).
3. Financial assets on the blockchain: that is DeFi (Decentralized Finance).

The ultimate goal of these on-chain methods is to achieve the tokenization of assets, allowing them to gain liquidity and investment opportunities on a global scale.

Distributed Ledger Technology (DLT) creates value on two levels:

1. Improve the efficiency of existing business models, such as reducing cross-border payment costs.
2. Innovative new business models, such as new asset classes like Bitcoin.

In the AI era, tokens can also serve as data and pricing units, such as the usage fees of ChatGPT being calculated based on tokens.

As traditional finance and the cryptocurrency market converge, the demands for compliance have also increased. Future DLT systems need to meet regulatory requirements such as KYC (Know Your Customer), AML (Anti-Money Laundering), and CFT (Counter Financing of Terrorism). To this end, some institutions are developing blockchain solutions that can meet these compliance needs.

The speech concluded by emphasizing that technology itself is not the end point; what matters is the applications and value that technology can bring. Just as users need a hole in the wall rather than the drill itself, the true value of blockchain technology lies in the new types of assets and financial applications it can create, which will become an indispensable part of future asset allocation.