Four things to know: Digital Digest November 2023

Digital Digest November 2023

In this edition of our award-winning Digital Digest, we explore the interoperability between decentralized finance (DeFi) networks within a digital-native environment, or between new DeFi systems and traditional financial (TradFi) infrastructure.

November 2023

This edition revisits the “dual-track” and “hybrid” themes we touched upon in last quarter’s Digest in more detail, and examines the interoperability that occurs when the DeFi and TradFi worlds operate in tandem, which we anticipate will remain the case for some time.

1. The fundamentals of digital finance and blockchain system interoperability are still being established
It remains an active research area with numerous technological, regulatory and security issues to be addressed. Enhancing the scalability, security and effectiveness of interoperability solutions must be the main goal of future development.

2. As with traditional assets, custody solutions for digital assets vary
There are various types of digital asset tokens (security, utility etc.) across various networks with different types of fungibility. Due to the range and diversity of digital assets, an investor holding multiple different assets may find it difficult to ensure the safe custody of all assets. There is no “one-size-fits-all” solution, and investors and custodians should consider which solutions best suit their needs.

3. Crypto composability is the art of combining various blockchain-based assets and protocols to create new, more complex applications
This composability has the potential to unleash a wave of creativity and innovation, providing a fertile ground for developers to experiment and create new financial instruments, and much more.

4. The Grayscale vs. SEC spot Bitcoin ETF case is likely only the beginning for crypto ETFs
The enhanced likelihood of a bitcoin spot ETF approval is a boost to several other providers – including VanEck, WisdomTree, BlackRock and several others – that either have similar applications pending with the SEC, or plan to submit them, which will be ready to go live if and when approval is granted.



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