Author: Jay Jo Source: Tiger Research Translation: Shan Oba, Jinse Finance
Abstract
Cryptocurrencies have demonstrated utility in remittance and payment scenarios, but their impact on the broader financial system remains limited. Traditional finance offers complex and refined services, while cryptocurrencies still lack breadth of application and trust.
Stablecoins have improved financial accessibility as digital currencies, but their role remains limited to basic functions like asset storage and transfers. To enable more complex financial activities, the cryptocurrency system urgently needs support from on-chain credit systems and privacy protection technologies.
These three elements constitute an interconnected structure that enables cryptocurrencies to transcend basic functions and possess the potential for structural transformation. The integration of stablecoins, credit, and privacy will bring about an entirely new experience and operational mode not available in traditional finance.
1. The Potential of the Crypto Industry Has Just Started to Be Released
Crypto is gradually expanding from a speculative tool to practical scenarios like remittance and payment, but its market share remains limited compared to traditional finance. Data shows that the total size of the traditional financial market in 2024 is $247 trillion, while the crypto market is only $4 trillion, a difference of nearly 60 times.
The utility of cryptocurrencies has been verified, but mainstream adoption has not been achieved, and the application range remains narrow, with significant gaps still existing between crypto and mature financial systems.
So, what does crypto need to enter a broader financial ecosystem? This report focuses on three core elements - stablecoins, credit, and privacy - to explore its expansion paths and strategies.
[The rest of the translation continues in the same manner, maintaining the specified translations for specific terms]The technical method protects through confidentiality rather than complete anonymity to address these limitations. Inco and Circle Research jointly developed cERC20 (Confidential ERC-20). It uses fully homomorphic encryption (FHE) to keep transaction amounts and balances encrypted while maintaining on-chain transaction validity verification.
The core advantage of cERC20 lies in selective disclosure, rather than completely hiding all information. Information is only disclosed to authorized parties when necessary. This ensures regulatory and audit compliance. It represents a technical solution that can reconcile conflicting needs between transparency and confidentiality.
Such confidentiality technologies are a prerequisite for cryptocurrency to expand beyond simple point-to-point transmission. They enable businesses and institutions to adopt in the real world. cERC-20 provides the privacy infrastructure that meets these conditions. It plays a crucial role in building cryptocurrency as a trust-based expanded structure that allows various economic participants to engage.
3. From Limited Impact to Structural Transformation
Compared to traditional finance, the impact of cryptocurrency remains limited. It has proven product-market fit in certain areas. However, compared to the multi-layered complex system built by traditional finance over decades, cryptocurrency still has gaps in scope and trust.
Stablecoins are the first step in narrowing this gap. They improve financial channels and efficiency, especially in regions with weak financial infrastructure. However, they still focus on basic functions like value storage and transfer. To expand to a broader financial ecosystem, on-chain credit needs to be combined with privacy protection technologies.
When these three elements are combined, cryptocurrency can go beyond simple functions and become a structure that supports continuous, comprehensive financial activities. For example, a freelancer A from South Korea can receive wages in stablecoins from overseas. Based on these transaction records, they can obtain an on-chain loan for active investment activities. Throughout the process, financial information remains protected. However, when tax reporting is needed, this information can be selectively disclosed.
The key structural change is automation. Complex fund flows and regulatory compliance processes in traditional finance can be automated in a single environment. This structure also enables borderless financial participation. Users and businesses from different countries can access this ecosystem without the limitations of existing infrastructure.
Many financial areas have not yet landed in the on-chain environment. However, as on-chain credit and privacy technologies continue to develop on the basis of stablecoins, cryptocurrency shows the potential to produce structural impacts comparable to traditional finance. The integration speed and effectiveness of these three pillars will determine whether the cryptocurrency industry can bring true transformation to traditional finance—an industry 60 times larger than traditional finance.
