The Future of Fintech: Part 2

The Future of Payments

Scalability

  • As block space decreases, blockchains become more decentralized (more nodes can validate the chain), which increases a blockchains’ security. However, smaller block spaces limit how many transactions can be processed in one block.
  • As block time increases, validators have more time to verify the correct state of the chain (more time allows for more communication among nodes), which increases a blockchains’ security. However, extended block times limit how frequently blocks (and therefore transactions) can be processed.

Layer-Two: A Brief Overview

Image 1: A modern blockchain scaled through competing layer-two solutions

Sharding: A Brief Overview

Image 2: A sharded public blockchain
Image 3: A neo-blockchain scaled through a sharded layer-one chain

Privacy

Security

Factor One: The Security of the Chain Itself

Zk Rollups

Optimistic Rollups

Table 1: Comparison of Rail Solutions

Factor Two: Anti-Fraud Solutions

Security of Centralized versus Decentralized Systems

Triggering the S-Curve

The Future of the APIs

  • If the user does not utilize any privacy solution, all of that user’s transaction history would be public via his or her public address(es) on a public blockchain. Thus, a digital wallet could query the entire blockchain for the user’s activity through either a free-market query protocol, such as the Graph or Infura, or its own internal system.
  • If the user utilizes zero-knowledge proof based privacy solutions (such as on-chain mixers or a recursive zero-knowledge proofs), the user could store their encrypted transaction history on a decentralized storage protocol, such as Filecoin, and authorize access to digital wallets through a proxy re-encryption protocol, such as NuCypher.
Image 4: Future fintech infrastructure without sharding
Image 6: Future fintech infrastructure with sharding

Conclusion

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Partner at Bizantine Capital

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Andrew Bakst

Andrew Bakst

Partner at Bizantine Capital

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