by Eric Saraniecki, Co-Founder & Head of Network Strategy, Digital Asset
January 17, 2025
2024 was the year that investors and exchanges turned to crypto derivatives markets, with average daily trading volume exceeding $100bn and combined daily spot and derivatives volumes on exchanges exceeding $300bn2. With the emergence of clearer regulation and innovation in digital assets, on-chain money and exchanges, the trend shows no signs of letting up. Indeed, reports note that trading in futures and options accounts for around 71% of all digital asset trading volume.3
The by-product of institutional investors and market makers turning to these markets is that they have tasted the 24x7 trading and settlement experience. The cat is out of the bag.
Round-the-clock trading and seamless settlement mean that the inefficiencies and outdated constructs of traditional marketplaces are felt even more acutely on trading desks. But bringing crypto's best features to existing markets will require melding tradfi’s best practices in creating fair markets, with the new assets, rails, and open access of crypto and defi.
The potential utility of blockchain-enabled asset transfers is evident in these new marketplaces, despite use cases largely existing outside the constructs of our existing financial markets. Investors increasingly expect this innovation to translate into existing capital markets rails and daily trading operations. At the same time, there is growing recognition that a sustainable convergence between traditional and crypto capital markets demands one critical feature—privacy.
Source:
Crypto trading volumes ($tn), Financial Times, October 28 2024
Maintaining the edge
As digital asset adoption and use surges, user experience is taking the lead. While on-chain transparency is vital for certain aspects of decentralized networks, such as governance, it cannot come at the cost of competitive edge, or impede the creation of fair markets.
The downside of trading in the open on public permissionless blockchains is that transparency comes at the cost of confidentiality. It’s a bit like playing cards and showing your hand to the table, hoping no one finds a way to exploit it. In a world where trading desks want to embrace crypto-assets and rails, that level of visibility is a showstopper when it comes to making larger trades. On the other hand, the same assets on the Canton Network let you play your best strategy with confidence—revealing only what’s necessary to the relevant participants while ensuring every move is verifiable, final and secure.
Builders, validators, liquidity providers and traders must be able to shield their strategies and manage risk—without compromising the open access, convenient on/off ramps, and seamless liquidity they experience on crypto rails.
In the year ahead, privacy solutions will be vital for encouraging deeper institutional involvement, providing the confidentiality that trading operations demand. By implementing the individual protections of traditional markets, privacy-enabled crypto-assets on public blockchain rails can increase the utility of digital assets - both within fast-growing crypto-markets, and in the broader evolution of on-chain capital markets.
Privacy-enabled assets on a public, decentralized blockchain like Canton Network are providing a new way forward. By adding privacy to the innovation opportunities of public blockchain, market participants no longer need to choose between islands of illiquid digital assets locked in private networks, or interesting new assets that can be transferred at the speed of blockchains but with everyone knowing what you are doing. It opens up the reality of efficient, low-risk settlement, better capital utilization, and cash and collateral that is highly mobile and generates yield in the process. In short, this combination can provide the foundation for delivering the speed, access and openness of crypto, alongside the fairness and stability of tradfi and bring the next $10T on-chain.
A better model to embrace disruption
The promise of blockchain to transform capital markets has proven elusive to achieve, perhaps because to date, choices have been binary.
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Private networks offer more safeguards and control, but limit access and fragment liquidity. |
Fully transparent public blockchains offer speed and flexibility, but limit the size and confidence in trading due to the risk of disclosing data or strategies. |
Canton offers a better model, where competitors can interact and gain the benefits of highly composable assets and instant, low-risk value exchange and settlement, with the embedded privacy necessary to trade with confidence. Here are a few examples.
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TradFi |
Crypto |
Modernizing the $7Bn syndicated and private corporate credit markets.4 Founded by a group of industry competitors to collaborate without compromising sensitive data. Revolutionizing syndicated loans with shared accurate data and a unified lifecycle.
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Addressing inefficiencies and constraints faced by crypto derivatives markets. Creating a cost-effective, automated, privacy-enabled on-chain collateral and margin management solution for bilateral derivatives. In partnership with Cumberland, Digital Asset and select counterparties.
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Transforming repo markets with faster settlement and 24/7 repo financing (intraday, out of hours, any duration). Substantially reducing operating expenses and capital costs for the market participants that are each other's clients and competitors.
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Since joining Canton,Hashnote USYC has become the leading tokenized treasury product by AUM.5 Hashnote combines USYCs utility as high-quality collateral, with the baked-in privacy available on Canton making it attractive as a form of yield-bearing collateral.
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The barriers between tradfi and crypto capital markets are dissolving. As major market makers, exchanges, crypto-service providers and disruptive tradfi firms embrace this convergence we are seeing a new wave of innovation that balances the best of public blockchains with the best practices of building sustainable markets. QCP’s initiative to address the inefficiencies and constraints faced by crypto derivatives markets is just one example:
“We are excited to spearhead this initiative with the Canton Network to redefine the future of derivatives markets. Its unique ability to deliver privacy forms the foundation for a groundbreaking global collateral network, enabling seamless and secure connections across trading venues, brokers, investors, and FMIs. By addressing inefficiencies in collateral management, this initiative reinforces our commitment to providing clients with trusted, efficient, and scalable solutions that redefine market standards.”
Darius Sit, Founder and CIO at QCP.
And so the journey continues. By continuing to unify defi innovation with the best practices of tradfi, Canton is stimulating the next wave of liquidity, asset utility and institutional crypto innovation on-chain to deliver the promise of synchronized finance. Watch this space…
1 2024 Coinglass Derivatives Exchange Report: Reshaping the Competitive Landscape and Analyzing Key Differences, Dec 30, 2024
2 https://www.theblock.co/data/crypto-markets/spot/total-exchange-volume-daily
3 Crypto exchanges turn to derivatives to lure cautious investors, Oct 28, 2024
4 Versana, Versana delivers on modernizing the corporate loan market, June 27, 2024
5 RWA.xyz, Tokenized Treasury product metrics, https://app.rwa.xyz/treasuries
6 Coindesk.com, DeFi Protocol Usual’s Surge Catapults Hashnote’s Tokenized Treasury Over BlackRock’s BUIDL, Dec 20, 2024
