The Role of Public Blockchains in Driving Institutional DeFi Adoption

The market for tokenized assets is on the cusp of exponential growth, with forecasts suggesting it will reach $16 trillion by 2030, according to Boston Consulting Group. Public blockchains are becoming instrumental in enabling institutions to transition traditional financial assets onto the blockchain, offering enhanced operational efficiency, robust security, verifiable trust, and new revenue streams. While some blockchains are fully open and permissionless, allowing unrestricted viewing of transactions, application development, and participation as validators, others integrate permissioned elements to ensure compliance and controlled participation within the same open network. A crucial question remains as to whether public or private blockchains will pave the way for widespread institutional adoption. Emerging regulatory frameworks, such as the EU's Markets in Crypto-Assets (MiCA) and Singapore's Payment Services Act (PSA), are providing much-needed clarity. Historically, institutions have favored private blockchains for their security and compliance, but these restricted and siloed networks limit participation, leading to low liquidity and inefficient price discovery. With increased regulatory clarity, public blockchains like Ethereum or Solana are likely to become the preferred choice for institutions. Leading firms, including BlackRock and Franklin Templeton, are already leveraging public blockchains to bring regulated traditional financial assets on-chain, resulting in significant capital flows into DeFi. Over the next five years, additional financial assets, such as private equity, are expected to move on-chain, further accelerating institutional adoption. By transitioning these assets onto public blockchains, institutions benefit from increased transparency and interoperability, streamlining processes and enhancing market integration. The 24/7 intraday settlement enables more efficient capital flow management without the constraints of traditional trading hours. For investors, these tokenized assets offer low-risk, high-quality liquidity with lower barriers to entry and better availability, making them an attractive option that brings stability to blockchain-based markets and supports broader DeFi adoption. Beyond operational efficiency and compliance, public blockchains can offer revenue and liquidity opportunities. They may provide compliance features such as clawback and freezing mechanisms to address operational and regulatory challenges. Decentralized identity solutions also offer secure on-chain identity verification, supporting know-your-customer (KYC) processes. Adopting public blockchains opens up new revenue streams through enabling global market access via fractionalization, allowing institutions to engage a broader investor base and increase trading volumes. The collateralization of tokenized assets facilitates borrowing and leveraged trading, improving capital efficiency. Real-time, on-chain collateral management offers faster liquidity and more flexible asset deployment compared to traditional systems. As public blockchains pave the way for a more productive financial system, the question is no longer whether institutions will adopt them, but how quickly this transformation will occur. This shift is not just redefining finance; it's laying the groundwork for DeFi to become a fundamental part of global financial markets. Public blockchains can play a similar role to the open, public internet, which improved upon closed networks and enabled global connectivity, innovation, and growth. With their open architecture and unrestricted participation, public blockchains are set to transform global finance and enable an Internet of Value.