The shadow of the 2022 collapse of the encryption market still looms over the industry, and the uncollateralized lending environment has not fully recovered. The collapse of lending institutions such as BlockFi, Celsius, Voyager, and FTX that year had a profound impact on the entire ecosystem.

After three years, a company named Cycles has launched a privacy-focused clearing protocol aimed at establishing new infrastructure for a sustainable encryption credit market.

In May of this year, Cycles launched the beta version of the clearing platform Cycles Prime. This decentralized clearing system allows encryption trading firms to conduct net settlements without the need for collateral or custodial assets, specifically serving institutional trading companies looking to reduce credit dependence.

Cycles CEO Ethan Buchman pointed out in a recent interview that since the crisis in 2022, unsecured credit conditions have significantly tightened. Many businesses that originally relied on credit are now forced to increase collateral or inject funds early. He stated that the 2022 crisis drained a large amount of liquidity from the ecosystem, leading to a continuous decline in trading volumes of numerous tokens and DeFi protocols.

The current encryption industry, like the traditional financial sector, has significantly increased its vigilance against the risks of unsecured credit, making it more complex and difficult to rebuild a healthy credit ecosystem.

Interestingly, although more and more people tend to compare encryption with traditional financial systems, especially in the context of more traditional financial assets migrating to the blockchain, Buchman emphasizes that the encryption industry cannot simply copy traditional financial models.

He believes that the encryption industry should explore "network-aware clearing methods," which can better adapt to the unique characteristics of decentralized finance and provide the industry with more resilient credit infrastructure.