Opinion of: Jason Delabays, protagonist of the blockchain ecosystem in Zama
Despite the recent recent resurgence of decentralized finances (Defi), most capital in traditional finances remains out of reach. Most will blame scalability, regulation or bad UX. The true blocker is much more fundamental: the lack of confidentiality. Solve that and Billones will unlock.
In its December 2021, the total value of Defi blocked (TVL) reached the incredible $ 260 billion. However, it moves away and that figure begins to feel small, especially when the global financial system moves billions every day. The currencies only see more than $ 7.5 billion of negotiation daily, and the global bond market worth more than $ 130 billion.
Defi has recovered since the accident 2022-2023. Loan protocols have shown power of permanence, and TVLs are increasing again. However, Defi is still scratching the surface of global capital, not because it cannot climb, but because it lacks something, however traditional.
Encrying technology is knocking out the highest obstacle
For most high -level institutions and players, confidentiality is not negotiable. However, each deposit, loan and retirement is in light of public block chains. That level of transparency could excite cryptographic purists, but for most serious capital, it is a Kdealbreaker.
That is why, for so many, the idea of ​​unlocking the promise of Defi: Frictionless Finance, open and institutional degree, still seems distant. Recent technological developments, specifically in totally homomorphic encryption (FHE), suggest that reality may be closer to what it seems.
Having earned more main attention, the FHE is no longer just an academic curiosity.
Privacy preservation technology allows data to be processed without deciphering it. Confidential information remains encrypted even while in use. Institutions can be taken to Defi to maintain their private offices and positions.
Non -collateralized loans and beyond
Consider non -collateral loans, since it could be said that it is one of the clearest cases for the FHE in Defi and reflects how most of the credit in traditional finances works. While traditional finances are rarely based on collateralization, Defi does, blocking assets to handle the risk, which limits its reach.
Change the equation. This is how it could work: first, a user shares encrypted credit or knows the data of his client (KYC) with a protocol. A smart contract then verifies that data using the FHE, for example, asking: “Is your credit score above 700?” – Everything without deciphering it. If approved, the user can borrow without presenting the guarantee and confidentiality. If they fail to comply, the lender can obtain the right to decipher specific data to lead to legal actions.
In any case, institutions that evaluate the risk and credit of credit can finally enter the world of the chain without revealing positions or expose customer data.
This type of loan presented by privacy makes defi more flexible, inclusive and aligned with traditional finances. Non -collateralized loans are just the beginning. One can go fu with the FHE, rebuilding the foundations of the defi loans.
Consider taking today’s main protocols and rebuilding them with ERC-20 confidential in the center. Now layer in encrypted credit scores, hidden loan amounts and maximum removable value protection (MEV). This is not just an update of functions: it is a new primitive for loans.
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For institutions, it would lead to private guarantees groups where positions remain confidential, with the credit -based loan option. Retail users could access without guarantee loans, protected from the front bots and MEV. For loan protocols, it would offer a way to evolve towards the first confidentiality systems that can finally climb to billions without compromising without trust.
Public block chains have always been better than private block chains when it comes to opening and interoperability. However, private chains have traditionally offered a stronger confidentiality, making them more attractive to institutions that need to maintain private data. With the FHE, public blockchains can match the private chains of confidentiality without giving up their central strengths.
Challenges to resolve, but there are no reasons to surrender
All of the above sounds great, but if it really defines you will climb and bring the billion still trapped in traditional finances, more than only private credit scores and confidential loan groups are needed. A completely new base must be created, and there are several design challenges to address first, such as liquidations. Cilled values ​​complicate triggers. The FHE admits comparisons, but notifying the liquidators discreetly may need encrypted events or relays out of chain.
Credit systems are another complexity area. Structure encrypted KYC and the default application needs legal and technical alignment; The challenge is to balance confidentiality and responsibility.
MEV protection also demands more work. Hiding amounts of transactions is a good start, but you may need to combine amounts encrypted with lots or crazy time for more dark patterns to completely defend.
Liquidity is also affected; Cweth is divided from Ether wrapped (Weth), but the performance of the incentives or seamless wrappers could close this gap. From UX’s point of view, deciphered tools must be simple wallet.
Finally, the oracles pose a unique problem. Public prices can insinuate values, but the oracles compatible with the FHE could solve this later.
None of these are treatment, simply puzzles. They must be resolved before achieving the maximum potential for defi. The institutions will not appear if each movement is public, and retail users should not need to give up privacy or exaggerate to obtain credit. With the developments in the rapid movement, perhaps the efficiency of the DEFI, the confidentiality of Bank Swiss and the real world credit, everything in the chain, is almost within reach.
Opinion of: Jason Delabays, leader of the blockchain ecosystem in Zama.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The points of view, the thoughts and opinions expressed here are alone of the author and do not necessarily reflect or represent the opinions and opinions of Cointelegraph.
