Financial infrastructure requires rethinking blockchain architecture

The crypto {industry} has an infrastructure drawback that’s hardly ever mentioned immediately: we’ve got monetary programs constructed on blockchains that weren’t designed for finance, which requires us to rethink blockchain structure.

I observed this the second we began constructing Momentum. Most protocols are launched as remoted merchandise, a DEX, a credit score market, a staking answer, every handled as a separate device moderately than a part of an interconnected system. However this fragmentation reveals a deeper architectural mismatch. The underlying blockchain layer is just not constructed to fulfill the calls for of the monetary world: parallel processing at scale, composable primitives, and infrastructure that different protocols can reliably construct upon.

This isn’t theoretical. It manifests in commerce failures throughout peak demand, capital inefficiency in liquidity markets, and an ecosystem the place every protocol operates in isolation moderately than synergistically.

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The actual limitation: Blockchains will not be designed for monetary functions

Once we determined the place to construct our DEX, the selection was apparent to me, however appeared counterintuitive to many. Everybody requested: why not Ethereum (ETH)? The reply reveals all the things about how I take into consideration infrastructure.

Contemplate the elemental distinction between the way in which Ethereum and Sui (SUI) course of transactions. Ethereum’s sequential execution mannequin signifies that every transaction should be processed within the right order, creating bottlenecks underneath load. This wasn’t a bug in Ethereum’s design; it was by no means the supposed use case. Ethereum was constructed as a general-purpose computing platform.

Funds require one thing completely different. Most monetary operations are unbiased. When Alice exchanges tokens and Bob stakes property, these transactions will not be depending on one another. Sequential processing creates synthetic congestion. Parallel processing isn’t just an optimization; it’s structurally obligatory.

Sui was constructed from the bottom up with parallel execution and object-centric design utilizing the Transfer programming language. This architectural selection will not be solely quicker, but in addition makes it doable to comprehend a very completely different class of monetary merchandise on a big scale.

The proof got here earlier than we anticipated. In six months, our DEX has scaled from zero to $500 million in liquidity and $1.1 billion in day by day buying and selling quantity, constructing $22 billion in cumulative buying and selling quantity whereas permitting 2.1 million customers with out important congestion. Processing that form of quantity with out transaction errors will not be a advertising and marketing achievement; it’s a testomony to fundamental architectural soundness. Attempt to obtain these metrics on a sequentially executing blockchain and you may see precisely why the structure issues.

Why infrastructure configurability is extra necessary than particular person merchandise

There’s a second, extra refined drawback that I’ve realized to acknowledge: monetary merchandise must be composable constructing blocks, not remoted silos.

A well-designed monetary infrastructure layer ought to permit different protocols to construct on shared primitives. If every protocol has to construct its personal treasury administration, its personal staking answer, its personal liquidity infrastructure, the ecosystem fragments. Builders spend time fixing similar issues as an alternative of innovating new ones. I’ve seen this occur repeatedly in chains.

That is the place most protocols fail. They construct one product nicely, then the ecosystem round them calcifies. Every new protocol basically begins from scratch.

Once we constructed our protocol, we consciously determined to not simply create a DEX. We have constructed infrastructure primitives that different protocols would need to rationally use as an alternative of rebuilding. MSafe, our treasury administration answer, now protects a whole lot of hundreds of thousands throughout the Transfer ecosystem. Not as a result of we compelled adoption, however as a result of it solved an actual drawback higher than the alternate options.

Extra protocols constructing on shared infrastructure imply extra integration factors, extra configurability, and better system worth for everybody. This solely works if the primitives are literally good. Concentrated liquidity market-making expertise with aligned incentives creates capital efficiencies that conventional AMMs can not match. Liquid staking that produces a yield-bearing receipt creates collateral that’s on the similar time productive. Multi-signature treasury administration that works reliably reduces friction in protocol administration.

These will not be nice comforts. They’re the distinction between an ecosystem that brings collectively worth and an ecosystem that fragments. That is exactly what permits Momentum to supply infrastructure that different protocols rationally select to construct on moderately than rebuild themselves.

The institutional capital drawback is the infrastructure, not the functionalities

Crypto has all the time struggled with institutional adoption. The usual assertion focuses on regulatory uncertainty or UX limitations. The actual bottleneck is usually less complicated: establishments can not use a decentralized infrastructure that doesn’t have compliance capabilities.

That is no purpose to centralize. It’s a purpose to construct the correct layer on prime of the decentralized infrastructure. When you can provide permissioned compliance as an optionally available module and let institutional customers confirm their id and buying and selling with full regulatory readability, whereas conserving the core infrastructure permission-free, you resolve the issue with out compromise.

Establishments is not going to commit severe capital to programs that can’t present regulatory audits, KYC verification or compliance documentation. These will not be traits, they’re structural situations for institutional participation. That is not a gatekeeper. It’s recognizing actuality.

The precise argument

Here is the declare I am making, no matter any explicit protocol: Blockchains constructed for normal goal computation can not effectively function monetary infrastructure. Finance requires structure particularly designed for parallel processing, composable primitives, and institutional compliance. Protocols will migrate to blockchains with these options – not as a result of they’re fashionable, however as a result of the economics of working on higher infrastructure are merely superior.

This isn’t an argument that “Sui is best than Ethereum.” Ethereum can and may proceed to evolve. Layer 2 options are professional approaches. That is an argument that monetary programs must be constructed on completely different architectural foundations than general-purpose computing platforms.

The corollary to that is much less apparent: if a blockchain is purpose-built for the monetary sector and achieves significant adoption, it turns into the pure basis for monetary innovation. Not due to advertising and marketing, however as a result of different protocols rationally select to construct in there.

The query for the sector will not be which chain ‘wins’. What issues is whether or not we’re keen to acknowledge that one-size-fits-all blockchain structure was by no means the correct method, and that specialised infrastructure delivers higher monetary outcomes.

That realization adjustments all the things about how protocols must be constructed and the place they need to be deployed. It adjustments the way in which I take into consideration Momentum, and it ought to change how you concentrate on the place to construct subsequent.

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