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Today, one of the major challenges associated with blockchain is scalability. The ever-increasing demand for blockchain applications has resulted in significant scalability challenges, resulting in transaction latency, making the system slower and less efficient, thereby hindering their widespread adoption and utility.

As blockchain adoption continues to surge, the issue of scalability looms large. Therefore to address these challenges in order to be able to handle a larger number of transactions and have more efficient performance, the blockchain industry has been actively working on solutions to address these blockchain scalability concerns.

In this blog we will delve into the various challenges associated with blockchain scalability problems, and examine the various blockchain scalability solutions, exploring their fundamental concepts, benefits, and real-world implications to address these issues while maintaining the networks security and decentralisation.

What is blockchain scalability?

But first of all, what is blockchain scalability? When discussing scalability in the context of blockchain technology, the term refers to the transaction processing speed. Blockchain scalability has to do with the capacity of a blockchain network to handle a growing volume of transactions, store data and increasing the number of nodes running in the blockchain network efficiently and in a timely manner, without compromising on its core features such as security, decentralization, and consensus. For a blockchain network to meet up to its expectations, it must be able to process loads of transactions per second (TPS). Some factors which can impact blockchain scalability are networking, cost and capacity, finality, throughput, and confirmation time.

Why is scalability in blockchain important?

The importance of scalability cannot be underestimated. Scalability is a critical factor in blockchain networks since the network's size and complexity increase with each transaction added to the blockchain. It is pivotal that blockchain networks are able to process loads of transactions very quickly and effectively to meet the increasing demands.

When a certain network is not capable of handling the transaction demand or requirements, it will result in slow transaction processing times, high fees, and poor user experience. Slow transaction times and high transaction fees may hinder the usability and practicality of blockchain networks, especially for applications that require high transaction volumes, such as decentralized finance (DeFi), supply chain management and others. As a result, scalability is critical for blockchains future growth.

Scalability challenges

Scalability has been identified as the most significant barrier to establishing public blockchains. Blockchain scalability problems basically refer to the challenges in the blockchain network. These challenges include: limited throughput, high fees and long confirmation times.

One of the primary limitations of many popular blockchains is their limited transaction throughput and latency in processing transactions promptly. Scalability issues can arise when a blockchain network is unable to process a sufficient number of transactions when there is a significant increase in the number of transactions, leading to slower confirmation and processing times and higher fees.

Traditional blockchains, like Bitcoin and Ethereum, are facing inherent scalability limitations due to their design choices. These networks typically rely on consensus mechanisms that require every participant to validate and store all transactions. The scalability issue emerges mostly when the number of nodes and transactions increases. While this ensures decentralization and security, it comes at the cost of limited transaction throughput. These blockchains thereby experience congestion, resulting in delays in transaction confirmation and inflated transaction fees.

Bitcoin, is facing scalability issues due to its limited block size, that restricts the number of transactions that can be included in a single block, with block creation time averaging 10 minutes and block size limited to 1 MB. The current capacity of the Bitcoin blockchain can only process around 7 to 10 transactions per second (TPS), far less than traditional payment systems like Visa, which can handle thousands of transactions per second.

The Scalability/Blockchain Trilemma

Blockchain networks face a fundamental challenge known as the scalability or blockchain trilemma. It refers to the idea that it is challenging to simultaneously achieve three key features of a blockchain system: decentralization, security, and scalability, thus requiring trade-offs to improve scalability.

The trilemma suggests that obtaining increased scalability would come at the expense of decreased security and decentralization. At the same time, it is critical to remember that only scalability can enable blockchain networks to compete successfully with traditional, centralized platforms.

This trilemma highlights the need to finding the right balance between these three critical aspects of blockchain technology being essential for blockchain's growth. To address the Blockchain trilemma and other issues mentioned above, researchers and developers are exploring various solutions to increase scalability whereby a perfectly decentralized, secure and scalable blockchain is the ultimate goal. But is it feasible to create Blockchain scaling solutions without compromising security or decentralization? We will show that in the following part.

Solutions to these Scalability Problems

The need for scalable blockchain networks has spurred the exploration and development of numerous solutions and practices to help overcome these scalability challenges including the limitations of transaction throughput and high fees. These solutions aim to increase blockchain networks transaction throughput and capacity while maintaining the security and decentralization that make blockchain technology so valuable.

Scalability advancements are consistently made across the various blockchain networks.Blockchain scaling solutions have been developed in many forms. These can broadly be categorised into four categories including Layer 1 (On-chain) solutions, Layer 2 (Off-chain) solutions, Scalable consensus methods and hybrid solutions.

Each solution category provides distinct strategies for addressing the Blockchains scalability issues. Each approach tackles scalability differently, and their implementation varies depending on the blockchain network's architecture. In addition to these proposed solutions, other blockchain networks are exploring various innovative approaches to address scalability issues.

Layer 1 (on-chain) scalability solutions This is the most common blockchain scalability solution, also known as first-layer or on-chain scaling solutions. It is used to modify the core architecture of the blockchain. Layer 1 solutions aim to address scalability challenges by making optimizing changes to the underlying protocol itself, to increase its transaction throughput. Segregated witness (SEGWIT), sharding and hard forking are three prevalent layer 1 blockchain scaling options.

- Segregated Witness (SegWit) To address these scalability issues, Bitcoin developers proposed a solution called Segregated Witness (SegWit). SegWit, is a protocol upgrade that focuses on changing the way and structure of data storage. The solution is designed to primarily enhance transaction throughput on a blockchain, by changing how data is stored, making blocks on the network smaller resulting in increased capacity and storage space for transactions within Bitcoin's 1MB-storage blocks.

It separates transaction signature data from the transaction data, thereby enhancing scalability making the network more efficient. The removal of the digital signature may free up additional space for the addition of new transactions, allowing more transactions to be processed in each block, thereby improving Bitcoins transaction efficiency and capacity. However, while it enhances throughput and capacity, it isn't a comprehensive long-term solution to blockchain scalability.

- Sharding Another popular on-chain scalability solution is sharding introduced by Ethereum to improve the scalability of its blockchain. It involves the breaking down of the blockchain network into smaller, more manageable data sets known as shards.

By breaking down transactions into smaller pieces, it can act as the sum of its parts, with each shard handling a portion of the groups transaction processing.

Sharding effectively eliminates the need to rely on the performance of individual nodes to achieve quicker and more efficient transaction throughput.

Each shard operates independently, processing its own transactions and smart contracts. Each shard is thereby managed by specific nodes, allowing multiple transactions to occur simultaneously. The network would then execute the shards in parallel with one another

As a result sharding can significantly save both storage space and processing transaction times, thereby increasing the overall transaction throughput and capacity of the overall network. On the other hand it can also presents challenges related to security and communication between shards.

- Hard forks And there is the hard fork, a procedure that focuses on making structural or fundamental changes to a blockchain networks properties. Hard forking may increase the size of the block or reduce the time necessary to create a block.While hard forking is a prerequisite for layer 1 blockchain scalability solutions, a contentious hard fork is the most productive option. This essentially suggests a split in the larger blockchain network, with a certain segment of the community contradicting the core community on specific topics. In such instances, a subset of a blockchain community may elect to make fundamental modifications to the underlying source.

Layer 2 (off-chain) scalability solutions

The viability of first-layer or on-chain scaling methods is heavily dependent on changes to the main blockchain network. There is now a wide variety of Layer-2 or second layer scalability solutions to choose from that have drastically reduced transaction times.

Layer 2 solutions aim to address scalability challenges by building additional layers (supplementary protocols) on top of the existing blockchain network, without making fundamental changes to the underlying protocol. These secondary protocols would be used to offload transactions from the primary blockchain process transactions off-chain and periodically settling them on-chain in order to increase its capacity, which can reduce congestion and increase transaction throughput.

These layers can include state channels or side chains and protocols such as Lightning Network and Plasma, which enables instant and low-cost transactions for users. These solutions have demonstrated significant promise in improving the scalability of blockchain technology, thereby increasing its usability in various industries. Layer-2 solutions have the potential to transform finance, supply chain management, and digital identity verification, among other sectors.

- Sidechains Sidechains are a popular choice among layer 2 solutions for determining how to solve a scalability issue in the Blockchain of your choosing. They are separate chains that are connected to and run in parallel with the main blockchain.

They operate as a transactional chain next to the blockchain in big batch transactions, enabling the processing of transactions off the main chain, in a more efficient way. Sidechains can provide faster transaction confirmations and lower fees, as they are not limited by the transaction throughput of the main chain. This approach reduces network congestion on the mainchain, enhancing scalability.

In comparison to the primary chain, sidechains use distinct consensus techniques and can have different rules and functionalities tailored to specific use cases.

This can increase transaction throughput by offloading certain types of transactions to the sidechain, where faster and cheaper transactions can take place. Once transactions are completed on the sidechain, the final state can be securely settled on the mainchain via a two-way peg mechanism.

Prominent examples include Plasma on Ethereum and Parachain on Polkadot, known for their scalability improvements while maintaining security.

- State Channels State channels are a typical inclusion among layer 2 solutions for blockchain scalability. They allow two-way interactions between blockchain networks and off-chain transaction channels through various approaches. They enable off-chain transactions between users without having to interact with the main blockchain for each transaction. On the other hand, state channels function as resources near to the network that is integrated with the assistance of a smart contract or multi-signature method.

They may conduct numerous off-chain transactions without recording each individual transaction on the main blockchain. They thereby do not need the immediate participation of miners to validate transactions. When a transaction or series of transactions on a state channel is completed, the relevant blockchain records the final state of the channel and any related transactions with the final state on the layer-1 blockchain.

State channels have the potential to significantly improve the capacity and transaction throughout speed of the blockchain network to a great extent. By creating a secure channel, participants can engage in fast and inexpensive transactions. This technique can significantly reduce congestion and minimize transaction fees, making it ideal for high-frequency, low-value transactions, such as microtransactions and gaming applications.

- Nested blockchains At its core, this solution operates as a decentralized network infrastructure that utilizes the main blockchain to establish parameters for a wider interconnected network of secondary chains. It guarantees the execution of transactions across a network of interconnected secondary chains. By allowing transactions to be executed over these secondary chains, nested blockchains can improve scalability without impacting the main blockchains security or decentralisation.

- Payment Channels Payment channels facilitate off-chain transactions between parties, conducted in parallel to the main blockchain. These channels are established, transactions executed, and channels closed with final state recorded on the main blockchain. Payment channels allow for faster, cheaper and more efficient transactions by conducting them off the main blockchain. By establishing a direct payment channel between two parties, transactions can occur rapidly and with minimal fees. Lightning Network (Bitcoin) and Raiden Network (Ethereum) are notable implementations.

One popular Layer 2 solution is the Lightning Network, which is a payment channel network built on top of the Bitcoin blockchain. The Lightning Network is an off-chain protocol that enables instant, low-cost transactions by establishing payment channels between users.Transactions can be routed through these channels without requiring confirmation on the main blockchain. They can conduct multiple transactions off-chain, and then settle the final transaction on the main blockchain The Network thereby exploits smart contract functionality through these private, off-chain channels over the main blockchain network.

Layer-2 solutions, such as the Lightning Network, offer promising improvements in transaction speed and cost. By shifting transactions away from the mainchain, the Lightning Network reduces the burden on the mainchain. As the secondary channels can process transactions more quickly than the main blockchain, this can help reduce network congestion and increase transaction speed for Bitcoin transactions. Consequently, users no longer have to pay mining fees or wait for prolonged periods for block confirmation.

Another prominent blockchain Layer 2 scalability solution is Plasma, which is a scaling framework for Ethereum. It primarily focuses on the use of child chains that come from a parent blockchain. Each of the child chains functions as a separate blockchain that operate independently and conduct transactions off the main Ethereum chain.

Plasma may be created for use cases involving processing a certain type of transaction while assuring execution in a comparable environment with enhanced security. Child chains can be used for various applications and smart contracts, and transactions on the child chains can be settled on the main Ethereum chain, enabling higher transaction throughput.

Scalable consensus mechanisms

In addition to Layer 1 and Layer 2 solutions, there are other innovative approaches that seek to address scalability challenges such as scalable consensus mechanisms, to streamline reaching consensus. They are thereby exploring protocol upgrades to improve their scalability. This approach helps streamline consensus so that the algorithms offer excellent throughput and scalability.

Alternative consensus mechanisms include solutions such as such as proof-of-stake (PoS) and delegated proof-of-stake (dPoS). These require significantly less energy than proof-of-work (PoW) and can process transactions more quickly, leading to improved scalability. For example, Ethereum made a transition from a PoW to a PoS consensus mechanism, which has laid to increase its transaction throughput and significantly reduced energy consumption. Other examples of scalable consensus mechanisms include Proof-of-Authority and Byzantine Fault Tolerance.

- Proof of Stake In a bid to address the scalability trilemma associated with blockchains, the Ethereum network has in recent times, embarked on numerous upgrades. They introduced a new consensus mechanism called Proof of Stake (PoS) to enhance scalability without compromising security or decentralisation, while considerably reducing the computational burden required for consensus.

Proof-of-stake (PoS) is a consensus mechanism where miners are replaced with validators, thereby altering the initial block validation tradition. These validators are selected randomly, and they can validate transactions and create blocks without solving complex mathematical problems. By selecting validators based on their stakes in the network, PoS allows for faster transaction processing and reduced energy consumption compared to PoW.

- Delegated Proof-of-Stake (DPoS) DPoS, or Delegated Proof-of-Stake, is a consensus technique, where a limited number of trusted nodes are selected to validate transactions and create blocks. In this instance, token holders get to choose validators for network transactions, which can improve transaction throughput compared to traditional PoW or PoS consensus mechanisms.

- Proof of Authority Proof-of-Authority is also a viable option among blockchain scalability solutions. It is a scalable consensus method with a reputation-based consensus algorithm, where only selected nodes have the power to authenticate the transactions on the network with this technique.The chosen nodes are in charge of validating network transactions using the Proof-of-Authority consensus technique.

- Byzantine Fault Tolerance or BFT And there is the Byzantine Fault Tolerance (BFT). This consensus technique addresses the Byzantine Generals Problem, which is a distributed system characteristic that implies the need for continual consensus despite various antagonistic participants in the network.

Hybrid solutions

There are various blockchain scalability solutions that involve a combination of the above approaches: so-called hybrid solutions. A blockchain might use both sharding and Layer 2 solutions to increase transaction throughput whilst also optimizing its protocol for better performance.

A great example is the Core DAO Network that tackles the scalability problem by leveraging theSatoshi Plus consensusmechanism, which combines the best aspects of Bitcoin's security and immutability (Proof-of-Work) and Ethereum's scalability and efficiency (DPoS).This innovative approach allows the protocol to provide a robust layer one blockchain solution capable of handling a significantly higher transaction volume while maintaining security and decentralization. This provides a promising framework for building scalable dApps and unlocking the true potential of blockchain technology.

Interoperability: Inter-blockchain communication issues

In a landscape with numerous coexisting blockchains, seamless interaction and interoperability is also a great challenge. There are various cross-chain interoperability solutions that aim to connect different blockchain networks, allowing for a seamless exchange of value and data. This may help increase the overall capacity of the blockchain ecosystem by allowing different networks to work together, thereby contributing to the alleviation of scalability concerns.

Protocols like Polkadot, Cosmos, and other interoperable blockchain networks enable seamless integration and communication and the efficient transfer of assets and data across disparate blockchains.This interoperability enhances scalability and opens up a world of possibilities for developers and users to leverage the strengths of multiple blockchains.

Looking ahead

Blockchain scalability is a critical factor that needs to be addressed for blockchain technology to reach its full potential and deliver on its promise of secure, decentralized, and efficient transactions. Balancing scalability, decentralisation and security thereby remains a critical challenge. However these are not insurmountable obstacles.

In the meantime various solutions have been proposed offering a promising path forward to overcome the scalability limitations of layer-1 blockchains.There is however no one-size-fits-all solution to the blockchain scalability problem and none of them are yet perfect and each has its limitations.

Looking ahead, the future of blockchain scalability is promising, with further advancements expected in scalability solutions. As blockchain technology continues to evolve, the balance between security, decentralization, and scalability will continue to be refined, propelling us toward a scalable and decentralized future, thereby driving the mainstream adoption of blockchain across various industries.

For businesses and organizations it is therefore important to stay informed on these developments and be proactive about adapting to the changing landscape of blockchain technology.

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Blockchain and the scalability challenge: solving the blockchain ... - Finextra

In the cyclical rhythm of technological innovation, bear markets often appear as challenging interludes. Yet, for those well-versed in the evolutionary journey of the internet, they are not to be feared. Instead, they present a profound opportunity for introspection, refinement and robust growth. The introduction and proliferation of Web3 technology is a testament to this journey, promising to usher in an era of decentralization, self-sovereignty and true digital ownership. But what makes Web3 so resilient amidst the bear markets testing times?

The digital realms evolutionary story begins with Web1, the internets static, read-only version. Here, passive users consumed pre-packaged content without meaningful interaction. Then came Web2, which empowered users to become content creators, igniting the rise of social media, blogging platforms and collaborative wikis. However, as revolutionary as these shifts were, they were but stepping stones to the more transformative Web3.

Web3 doesnt merely offer incremental improvements; it offers a paradigm shift. It emphasizes the decentralization of power and control, enabling genuine digital ownership and fostering an environment where users control their data. While Web2 revolutionized content creation, Web3 promises to redefine content and data ownership in an era of increasing concerns over privacy and autonomy.

While the bear markets shadows might seem long and ominous, history reminds us that its in these very crucibles that genuine innovation takes root. Recall the dot-com bubble of the late 1990s and early 2000s. While many startups with lofty valuations but little substance went bust, the period also gave birth to tech behemoths like Amazon, Apple and Google. These entities didnt just survive the downturn; they thrived, adapted and led the next wave of digital innovation.

Similarly, todays bear market in the crypto realm serves a dual purpose:

Despite the ebb and flow of market sentiments, the core promise of Web3 remains unyielding. Several factors underscore this resilience:

Projects that persevere through the bear market are typically those that are more than just technology-driven; they are mission-driven. And the mission? To redefine the internets foundational principles for a more inclusive, transparent and equitable digital future.

Furthermore, as the broader public becomes progressively enlightened about Web3s offerings, its adoption will likely surge. Beyond the financial realm, decentralized solutions are making inroads into supply chains, healthcare, entertainment and more. Each application further solidifies the importance and inevitability of the Web3 movement.

In understanding the Web3 revolution, its essential to recognize that we stand at the convergence of technological prowess and a societal shift towards decentralization. This movement is much bigger than transient market sentiments.

In the bear markets quiet, there is ample room for ideation, innovation and the laying of a foundation that will not just withstand, but thrive, in the subsequent bull market. For those navigating these tumultuous waters, its crucial to remember that this is but a phase, a rite of passage.

Web3 is more than an evolutionary step; its a transformative leap. As we collectively build this new internet layer, were not just shaping technology; were molding the future. Embrace the vision, stay the course and gear up for the luminous horizon that inevitably follows this temporal dusk.

Tomer Warschauer Nuni is CBDO @Pink Moon Studios, a serial entrepreneur, advisor and angel investor focused on Blockchain & Web3.

This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.

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Web3's resilience amidst the bear market: A promising horizon awaits - Cointelegraph

The blockchaina cryptographic, decentralized digital ledgerstands as one of the most innovative technologies of the 21st century. Despite its growing popularity and widespread applications, the essence of blockchain technology often remains shrouded in complex technical terms and daunting jargon. This article ventures to demystify blockchains intricacies by elaborating on its critical components, its profound impact on various industries, and its influence on market dynamics.

What Exactly is the Blockchain?

Mention blockchain, and many peoples minds default to Bitcoin. While Bitcoin was indeed the first to leverage blockchain technology, the blockchain itself is a far more expansive construct. Essentially, it serves as a digital ledger that chronologically records transactions across multiple computers. By virtue of its decentralized structure, the blockchain is less susceptible to the vulnerabilities that often plague centralized systems.

While Bitcoins public blockchain is perhaps the most well-known, blockchains come in different varieties. Some, like Ethereum, go beyond simple transactions, allowing for more complex operations like executing smart contracts. The adaptability of blockchain to various needs, from cross-border payments to data authentication, reinforces its versatility and widespread applicability.

Decentralization and Its Importance

Decentralization isnt merely a catchy phrase; its the cornerstone of blockchain technology. In a decentralized network, power isnt confined to a central authority; instead, control is dispersed across multiple nodes or participants. This structure safeguards against a single point of failure and offers enhanced security and transparency, making the network more resilient to attacks and manipulation.

However, decentralization presents its challenges, particularly in reaching a consensus among disparate nodes. To that end, different blockchain implementations use various consensus algorithms, like Proof of Work (PoW) or Proof of Stake (PoS), each with its specific benefits and limitations. Gaining a comprehensive understanding of these algorithms is fundamental for anyone looking to engage meaningfully with blockchain technology.

Market Dynamics and Price Predictions

As blockchain technology continues to gain traction, so does the cryptocurrency market. Whether youre a seasoned trader or a newbie, interpreting the volatility of bitcoin and crypto price predictions is paramount for investment decisions. Forecasting in the crypto sphere is far from an exact science and typically involves an array of methods, including technical analysis, machine learning algorithms, and sentiment analysis.

Smart Contracts and DApps

Smart contracts serve as the linchpin for many blockchain applications, especially within the realm of decentralized finance (DeFi). These self-executing agreements are coded directly into the blockchain, enabling trustless, automated transactions. They operate under predetermined conditions, offering transparency and reducing the need for intermediaries, thus cutting down on costs and execution times.

Similarly, decentralized applications (DApps) are applications that run on a blockchain. These DApps are gaining prominence in various sectorslike content distribution, supply chain management, and healthcaredue to their ability to deliver decentralized, transparent, and secure services. By eliminating the middleman, smart contracts and DApps are transforming traditional business models.

Beyond Financial Transactions

Although it originated in the financial sector, blockchains potential applications are virtually limitless. Consider healthcare: blockchain can facilitate secure, immutable records, thereby revolutionizing data integrity and patient privacy. Similarly, in supply chain management, blockchain offers unparalleled traceability and real-time updates, fostering more transparent and efficient systems.

Increasingly, governments are exploring blockchain for public services, such as secure voting systems. While these applications are still in developmental phases, the prospective impact of blockchain in various sectors highlights its transformative capabilities and why its more than just a platform for cryptocurrencies.

A Brief Summary

Deciphering the complexities of blockchain technology is far from trivial, but the endeavor is undoubtedly rewarding. As blockchain continues to mature, its myriad applicationsfrom its role in decentralized finance to its potential in non-financial sectorswill continue to captivate public interest. Navigating this vibrant landscape requires not only a technical understanding of what blockchain is but also an appreciation of its transformative potential in shaping the future of digital interaction.

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The Complexities Of Crypto: How To Help Break Down The Blockchain - UKTN (UK Technology News

Centralized finance (CeFi) services such as crypto exchanges have accelerated the adoption of digital assets and blockchain solutions. Despite this, while retail traders can still use them for convenient crypto transactions and day-to-day operations, institutional investors can thrive long-term if they limit their exposure to CeFi risks and move to decentralized finance (DeFi) instead. With ambitious new projects coming to the table, the next leg of innovation will be pioneered by platforms offering the necessary infrastructure to bring institutional funds on chain.

The history of CeFi platforms is fraught with catastrophic failures, from Mt. Gox to more recent examples like FTX and BlockFi. CeFi platforms have demonstrated serious vulnerabilities, suffering from issues ranging from hacking to bankruptcy and causing significant losses to both retail and institutional investors. It seems that, unlike the traditional banking system, the crypto industry doesnt have too big to fail services. The surprising collapses of Mt. Gox and FTX have revealed the weaknesses of the CeFi structure.

The same risks persist even today, as the CeFi industry hasnt been able to upgrade its underlying infrastructure despite new security measures.

2022 was a challenging year for the crypto industry, and it proved once again that CeFi couldnt provide transparent and secure investment management capabilities, with the platforms often co-mingling customer funds, engaging in extreme rehypothecation and lacking solid risk management practices. Moreover, centralized exchanges and platforms have too much control over user funds.

Although CeFi has been the go-to ecosystem for crypto asset management for years due to its liquidity and convenience, the risks are too significant to ignore.

The emerging DeFi sector offers some great alternatives that give institutional investors more control over their funds while taking security into their own hands.

DeFi platforms offer higher transparency and security, building on the promise of decentralization. All transactions on DeFi protocols are recorded on-chain, providing real-time visibility into assets and enabling asset managers to monitor their positions at any time.

Importantly, DeFi platforms allow investors to retain custody of their digital assets, mitigating risks associated with third-party custodians, which is typical for CeFi services. A case in point is the loss incurred by investors when Prime Trust, a third-party custodian, lost the keys to one of its wallets, leading to mass withdrawals. The firm recently filed for bankruptcy.

DeFi can change the game for crypto asset managers, but it also needs to address several challenges. To begin with, DeFi is highly fragmented, which makes it difficult to build well-rounded investment strategies across multiple chains. Ethereum still dominates the sector, but efficient networks like Avalanche and BNB Chain as well as layer-2 solutions like Arbitrum, Polygon and Optimism are also gaining traction.

For institutional investors, combining the convenience of CeFi with the transparency and security of DeFi would be the best-case scenario.

To combine DeFi advantages with TradFi-like convenience, the decentralized management platform Velvet Capital offers various benefits to institutional investors, leveraging a cross-chain operating system and providing an easy-to-use interface and tools.

Backed by Binance Labs, Velvet Capital enables the exploration of DeFi opportunities across multiple chains, which unlocks liquidity, eliminates fragmentation and helps crypto hedge funds, family offices and asset managers build diversified DeFi portfolios.

This cross-chain infrastructure and intuitive interface allow institutional investors to easily launch and manage tokenized funds, portfolios, yield-farming strategies and other structured products.

Source: Velvet Capital

As a DeFi protocol, Velvet Capital helps investors build portfolios and strategies that are fully on-chain, allowing investors to see their assets in real-time. DeFi is about trustless interactions with transparency as the central pillar, and investors using Velvet Capitals platform know exactly which assets theyre holding in custody.

Velvet Capital never takes custody of client assets and enables investors to hold their digital assets in a noncustodial wallet or multisignature vault.

The app makes it simple to create and manage crypto financial products by providing the back-end infrastructure as well as an intuitive experience to let users focus on finding the best assets and strategies across multiple chains.

Velvet Capital is the first DeFi protocol that provides omnichain asset management capabilities so that portfolio managers are not limited to a single chain and can execute complex strategies across several ecosystems, including Ethereum and BNB Chain.

Source: Velvet Capital

Investors who need additional advice can benefit from Velvets marketplace feature, which enables users to get exposure to the crypto market alongside the best hedge funds and asset managers. Its marketplace has index funds built by the community, funds run by institutional investors and funds run by advanced crypto traders.

While Velvet has an experienced team, it plans to adopt decentralization by letting the community participate in governance through its decentralized autonomous organization (DAO), and its Founders Club NFT collection acts as a gateway to the DAO.

Moreover, Velvet Capital will launch its institutional-grade, omnichain DeFi operating system in October, and interested parties can book a demo through their website.

Projects like Velvet Capital are at the forefront of a financial revolution, using DeFi infrastructure to democratize asset management. In an era dominated by centralized financial institutions, this approach offers a safer and more inclusive way for investors to expose the crypto space while mitigating CeFi risks.

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain in this sponsored article, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.

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From CeFi to DeFi: How investors can redefine their asset ... - Cointelegraph

In 1932, economist Clark Warburton published an article through The American Academy of Political and Social Science analyzing the economic impacts of the American Prohibition Era. Contrary to popular belief, he argued that the nationwide ban on the sale of alcohol had limited economic practicality people would continue businesses as usual so long as they could access alcohol on their own. In other words, the economic effects were generally overestimated insofar as the efficacy of the Prohibition was also overestimated.

In the most rudimentary sense, this logic is just as applicable to the social economics of Hamilton, N.Y.s Old Stone Jug.

Most sophomores and upperclassmen of Colgate University understand the importance of the Jug within the Hamiltonian social scene. For years, it has provided students with an accessible and reliable outlet as the primary social space in town. But current first-years largely only understand the Jug via stories, rumors and word of mouth. Since the beginning of the new academic year, the Jug has remained closed. Beyond speculation, there have been no concrete answers as to why.

While the reasons for the closure are presently unknowable, the social impacts of this change are not. The elimination of Hamiltons 18+ dance club is sure to have a major effect on the party scene. One may be inclined to believe that the practical effects are obvious a decrease in social options necessitates a decrease in the social life itself. Partying and late-night excursions would presumably decrease. But, as Warburton explained, we must remind ourselves that a limit on an economic want is only strong if the people cannot access it on their own.

To understand the Jug as an economic actor, one must frame it vis--vis the social paradigm of Colgate. This is to say Colgate students create a particular type of demand for outlets such as the Jug. It is no secret that the Universitys social life can be, at times, restrictive. Greek Life Organizations (GLOs) remain a dominant force in this sense and are, by definition, exclusive. Colgates Panhellenic Council estimates that there are roughly 600 students involved in sororities alone this year, which amounts to nearly 20 percent of the entire student body. With limited exceptions, the remaining students face difficulties accessing this side of campus life. In these ways, the impermeability of Greek life acts as an amplifier to a Jug-prompted shortage of social options on campus.

So, what happens when there is a surplus of restrictions on campus social life? It is a decentralization of campus social outlets. As opposed to a centralized location the Jug for after-hours activities, students now gather late at night in smaller pockets across campus. These include residence hall study areas, the outer vicinity of the 113 Broad Street Complex and other localized hotspots likely unbeknownst to the general student body.

This trend of decentralization has serious implications as late-night social activities now occur with no regulation. Property damage correlated to these mini-gatherings is more likely to occur. Curtis Hall residents are familiar with the consistent damage charges that result from uncontrolled activity late at night.

The residence hall at 113 Broad Street is a particularly interesting case study. Any residents of 113 or the surrounding area have likely noticed the loud and wild gatherings taking place there on weekends. One can find boomboxes at maximum volume playing club-style music and swaths of first-years dancing fanatically. Perhaps the most conspicuous detail is the number of students openly carrying the infamous red college party cups. This is categorically bolder and more risky than previous decentralized attempts at party life, endemic to the strong desire by first-years to reclaim it. It is as if the Jug was never closed, but simply relocated.

My argument is that the Jug was necessary in controlling this type of chaos. The Jug, if nothing else, was a united hub for nightly activity. It ensured consistency, routine and as a consequence some degree of order. At the very least, after-hours activities were concentrated on a particular schedule and location. This, I believe, has two important implications for safety.

Firstly, by virtue of routine, it enables students to adapt to consistent expectations: individuals know exactly how wild the party scene will get, they know where their friends are if they get lost and will not find themselves in a new environment. It is common knowledge that new environments are most dangerous for students who are not in the right state of mind. The decentralization of social life likely proliferates this danger.

Secondly, there was some level of tacit authority implicit in the Jug. There are adults who, by owning a social space, have some degree of liability for the safety of customers. Furthermore, Campus Safety officers know exactly where students will gravitate at night, adding an extra safety net in the case of a medical emergency.

There were inherent problems with the Old Stone Jug as a function of student social life. This is no secret; there will always be a degree of uncertainty in the context of these settings. But, if the student population is a polity, the Jug was Hobbes Leviathan a de facto system of regulation that became central in an environment of limited alternatives. Without it, we observe an unregulated, anarchic state of decentralized social uncertainty.

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The Social Economics of the Old Stone Jug - The Colgate Maroon-News