Can Decentralization Shape Financial Apps for the Better?

  • Zhengpeng Hou , co-founder at Suterusu project

  • 16.12.2019 10:45 am
  • Decentralization , Zhengpeng Hou is the co-founder of the Suterusu project. He is an open-source veteran with more than one decade of successful experience in contributing and building community. He has also worked for Linux distribution companies like Ubuntu in the past and devoted himself to the blockchain industry. He specializes in open source project development, IoT, and cloud computing and is a true believer in decentralized technology.

Blockchain technology continues to disrupt industries around the globe. Arguably, the movement towards decentralized financial services is seeing the most exploration. Coined decentralized finance (DeFi), this emerging application of blockchain technology has come to encompass several use cases aiming to align conventional and digital finance.

With stablecoin projects like JPM Coin and Facebook’s Libra set to hit the market, it’s apparent that momentum is growing. What was once an underground movement has now gone mainstream, igniting a new discussion surrounding the future of finance. According to market intelligence firm Tractica, increasing adoption of enterprise blockchain solutions will drive the global market size to $20.3 billion by 2025, up from $4.6 billion in 2018.

However, this growth doesn’t come without significant challenges. Emerging projects will have to contend with regulatory oversight and push-back from some of the world’s longest-standing institutions as they grapple with privacy and transparency. It’s worth exploring some of the most prominent applications of decentralized finance and the unique privacy-preserving mechanisms in use today.

Financial Applications for Blockchain

Decentralized finance now represents a multitude of financial services. This emerging financial system is built on public blockchains like Bitcoin and Ethereum and is ushering in a new era of financial accessibility.

Source: Fintech Collective

In general, six primary features differentiate public blockchains from the private networks used by governments and traditional financial institutions:

  • Permissionless: Anyone around the globe can access the network

  • Decentralized: All network records are maintained across thousands of computers (nodes)

  • Trustless: Networks rely on consensus mechanisms rather than a central authority

  • Transparent: All networks transactions are transparent and auditable 

  • Censorship Resistant: The immutable nature of blockchain prevents the altering of records

  • Programmable: Developers can implement business logic using self-executing smart contracts

Although use cases are vast and diverse, decentralized payment networks have come to dominate the DeFi narrative. This trend is likely the result of widespread demand for more efficient, affordable remittance platforms.

Remittance Networks

According to Blockdata, the global remittance market is forecast to reach a value of $1.035 trillion by 2022, and $1.413 trillion by 2025. The market intelligence firm expects East Asia will see the highest inflows, while Sub-Saharan Africa will generate the most growth.


Source: Blockdata - Remittance Market & Blockchain Technology

If blockchain platforms can tap into just a fraction of this market, the potential for growth is immense. This outcome is proven more likely when assessing the inhibitive nature of cross-border payments in the centralized financial system.

Cross-Border Payments

In the current system, it remains prohibitively expensive to send money across national borders. According to Visual Capitalist, the average global remittance fee is 7%. In contrast, decentralized payment networks bring fees below 3%. In a bid to deliver lower costs and enable faster payments, some blockchain projects have already gone live.

Source: FX Intelligence Analysis

Arguably the most established decentralized option on the market, Ripple continues to gain momentum following its $50 million investment in MoneyGram earlier this year. However, despite this investment, Ripple’s CTO acknowledges the challenge of convincing banks in the space to adopt its solutions.

Source: Yahoo Finance

That said, cross-border payments represent one of the most promising applications of decentralized technology. Despite incumbent industry dominance, blockchain technology provides a low-cost, near-instant alternative to inefficient centralized providers.


Source:  Blockdata - Remittance Market & Blockchain Technology

However, in developing these future payment networks, blockchain companies must also consider how privacy-preservation can be built into inherently transparent networks.

Privacy-Preserving Blockchain Mechanisms

With the exploration of decentralized payment networks expanding rapidly, privacy has understandably taken center stage. Because public blockchains operate under transparent conditions, the use of privacy-preserving mechanisms is crucial to achieving widespread adoption.

Secure Multi-Party Computation (SMPC)

Secure Multi-Party Computation (SMPC) is a subfield of cryptography that enables collaborative data analysis without revealing private data in the process. In the case of decentralized payment networks, SMPC presents several benefits, including:

  • Being able to carry out joint computations while keeping data secure

  • Retaining control over who receives the outcome of the computation

  • The guarantee that computations have been performed correctly

Appearing on Gartner's 2018 Hype Cycle for Identity and Access Management Technologies, SMPC is now a viable mechanism for privacy-preservation on blockchain networks.

Gartner - Hype Cycles of Identity and Access Management Technologies

Non-Interactive Zero-Knowledge Proofs (zk-SNARKS)

In the blockchain industry, Non-Interactive Zero-Knowledge Proofs (zk-SNARKS) have also become a prominent privacy-preserving tool. Similar in function to SMPC, zk-SNARKS encrypt data as it’s shared and only transmit pertinent information for a specific purpose. Again, in the case of blockchain-based payment networks, this functionality is extremely valuable.


As companies continue to expand on the cryptographic functions of zk-SNARKS, it’s apparent that the development of privacy-preservation mechanisms has only just begun. And this momentum, driven by the desire to achieve mainstream adoption, shows no signs of slowing down.

Is Decentralization the Future of Finance?

The world of decentralized finance is vast and complex, but several use cases have already begun to deliver results. Platforms such as Ripple, and emerging enterprise solutions like JPM Coin and Facebook’s Libra, point to a growing desire to bring blockchain to the masses.

During this transition, privacy-preserving mechanisms can generate value for businesses and consumers alike. For example, cost-efficiencies are likely as everyday processes are advanced and optimized, leading to a better understanding of consumer needs. Further, the consumer-corporate relationship can be rebuilt with a greater sense of trust through data sovereign networks.

Whatever the future looks like, it’s apparent that blockchain technology is highly disruptive and it’s here to stay.

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