Blockchain-Based Digital Asset Circulation: A Survey and Future Challenges

Abstract

The circulation of digital assets has become increasingly crucial in today’s digital economy, reflecting both its growing importance and the challenges it faces. Blockchain technology, with its inherent symmetry, has emerged as a transformative force in facilitating digital asset circulation, addressing various issues related to security, efficiency, and transparency. This paper aims to advance the development of digital asset circulation technologies by focusing on four key blockchain-based technologies: smart contracts, consensus algorithms, cross-chain technology, and decentralized exchanges. These technologies embody symmetry in their structure and operation, ensuring balanced and secure asset management across decentralized networks. This paper reviews the evolution of these key technologies, highlighting their contributions to the digital asset ecosystem. It explores effective application cases and analyzes the current challenges each technology faces. Additionally, this paper provides insights into potential future developments and directions to address these challenges and enhance the overall efficiency and reliability of digital asset circulation.

1. Introduction

As the global economy undergoes digital transformation, digital asset circulation is gradually replacing traditional asset circulation methods, becoming the core of modern economic activities. From traditional physical asset transactions, such as real estate and stocks, to instantaneous online trading of digital assets, like cryptocurrencies and NFTs, this shift not only enhances transaction efficiency and market liquidity but also reduces transaction costs and risks [1]. The convenience and flexibility of digital asset circulation provide unprecedented opportunities for global investors and consumers, while also promoting the renewal of financial regulations and regulatory frameworks to adapt to the rapid development of this emerging field. This evolution from physical to digital signifies a fundamental change in the way assets are circulated, paving new avenues for innovation and growth in the global economy [2].

Traditional assets [3] usually refer to the buying, selling, trading, and transfer of physical assets or non-digital assets. These assets include, but are not limited to, commodities, immovable property(such as real), and financial assets (such as stocks and bonds), etc. The circulation process usually relies on centralized financial institutions and legal institutions to ensure the legitimacy and security of transactions.

In traditional asset circulation, transactions often need to be executed through intermediaries such as banks, stock exchanges, and real estate trading centers, which are responsible for clearing, settlement, and record-keeping of transactions [3]. Due to the involvement of multiple intermediaries and paper documents, the transaction process may be slow and accompanied by high transaction costs, such as intermediary fees, administrative fees, etc. In addition, the circulation of traditional assets may also face risks such as fraud, misrecording, and limited asset liquidity [1]. In order to solve these problems, it is often necessary to establish complex legal and regulatory frameworks to supervise and manage the asset circulation process. With technological advancements, traditional asset circulation is gradually incorporating electronic and digital means to improve efficiency, reduce costs, and enhance security.

Digital assets are products of the information age, referring to data that exist in binary form and are stored on personal computers, servers, or in the cloud, with clear rights of usage and ownership [4]. These assets include not only text and media files but also offer long-term value and reusability. The range of digital assets is very broad, encompassing software, photography, logos, illustrations, spreadsheets, digital paintings, documents, emails, websites, and related metadata. With technological advancements, new forms of digital assets such as cryptocurrencies and non-fungible tokens (NFTs) are also being developed [5].

Digital asset circulation refers to the process of buying, selling, trading, or transferring digital assets in the network, including but not limited to cryptocurrency, digital securities, digital art, virtual goods, and so on [2,6]. The circulation of digital assets not only facilitates the digital transformation of the global economy but also provides unprecedented convenience and flexibility for creators and consumers. This mode of circulation breaks the geographical and time constraints of traditional asset trading, allowing assets to be bought and sold on a global scale in an instant. With the popularity of digital asset circulation, relevant laws, regulations, and regulatory frameworks are also being improved to ensure the legality and fairness of transactions. This includes regulations on the classification of digital assets, trading rules, tax policies, and so forth. At the same time, the circulation of digital assets also brings new challenges, such as the valuation of assets, the security of transactions, and the protection of privacy. To address these challenges, various technical solutions and industry standards are being developed and implemented. The future development of digital asset circulation will focus more on innovation and cooperation [4,6]. With the integration of new technologies such as 5G, artificial intelligence, and the Internet of Things (IoT), the application scenarios of digital assets will be more abundant and circulation methods will be more diversified. For example, through virtual reality and augmented reality technologies, digital artwork and virtual goods can provide a more immersive experience. At the same time, the development of cross-chain technology will also promote the flow of assets between different blockchain platforms and achieve a wider range of asset interconnection.

Blockchain is a shared, immutable ledger that helps record transactions and track assets in a business network. Assets can be tangible (house, car, cash, land) or intangible (intellectual property, patents, copyrights, brands) [7]. Almost anything of value can be tracked and traded on a blockchain network, reducing risk and cost. The emergence of blockchain technology provides a technical basis for the security, traceability, and transparency of digital asset circulation, which has greatly broadened the market size of digital asset circulation, accelerating the digital transformation of the global economy and a new era of asset trading and management [1].

With the transformation of asset circulation from traditional offline to online mode, transaction efficiency and convenience have been greatly improved. However, online digital asset circulation also faces many challenges, including high market volatility, security risks, legal regulatory uncertainties, market manipulation, and technical risks, which may expose investors to asset losses, legal disputes, and market instability. Therefore, introducing blockchain as a solution that provides decentralization, automation, security, and regulatory friendliness helps to improve the security and efficiency of transactions while providing regulators with a reliable means of supervision and promoting the development and maturity of the digital asset circulation market [8,9].

To summarize, this paper reviews recent studies on blockchain-based digital asset circulation. In particular, our work provides the following:

• Review summary: Our review summarizes the development and definition of digital asset circulation, including detailing the progression from traditional asset circulation to digital asset circulation and the introduction of key technologies;
• State-of-the-art solutions: We collect and review state-of-the-art solutions, providing an in-depth analysis of the collected works, focusing on their implementation, benefits, and limitations in digital asset circulation;
• Challenges and future directions: As part of our efforts to expand the perspectives of other researchers and blockchain-based digital asset circulation, we discuss challenges and open research issues, as well as identify new trends and future directions.

2. Key Technologies and Methods in Digital Asset Circulation

The rapid development of digital asset circulation technologies has revolutionized the financial landscape, enabling more efficient, secure, and transparent transactions. This paper provides a comprehensive overview of the key technologies and methods integral to digital asset circulation. Section 2.1 introduces the overall architecture of the blockchain-based digital asset circulation technology system. In Section 2.2, we examine the fundamental architecture of blockchain, which underpins digital assets by ensuring their immutable and decentralized nature. Section 2.3 focuses on smart contract technologies, which automate and facilitate trustless transactions. Section 2.4 discusses the essential consensus protocols that uphold the integrity and security of blockchain networks. Section 2.5 explores the technologies enabling cross-chain interactions, crucial for the seamless exchange of assets across different blockchain ecosystems. In Section 2.6, we address the technologies for privacy protection, ensuring confidentiality and anonymity in digital asset transactions. Finally, Section 2.7 examines the technologies behind decentralized exchanges (DEXs), which provide platforms for peer-to-peer trading without intermediaries. Together, these sections illuminate the multifaceted technological landscape driving the future of digital asset circulation.

2.1. Blockchain-Based Digital Asset Circulation Technology System

In the domain of digital asset circulation, blockchain technology underpins a decentralized, secure, and transparent framework for asset trading and management. Central to this technological ecosystem are consensus algorithms, privacy protection mechanisms, smart contracts, decentralized exchanges (DEXs), and cross-chain technology, which collectively form the foundation of digital asset circulation, as shown in Figure 1.

Consensus algorithms are the core of blockchain networks, ensuring that all participants achieve a unified agreement on transaction records, thereby preserving the security and stability of the system. These algorithms not only facilitate the execution of smart contracts but also ensure the security of cross-chain transactions. In parallel, privacy protection technologies, such as zero-knowledge proofs, homomorphic encryption, and secure multi-party computation, play a critical role in safeguarding transaction data and personal privacy, thus ensuring the confidentiality of sensitive information.

Smart contracts represent another cornerstone of blockchain technology, automating the execution of contractual terms through pre-defined code. This automation significantly enhances transaction efficiency and reduces costs. The self-executing nature of smart contracts enables complex transactions without intermediaries, driving the growth of decentralized finance (DeFi). Decentralized exchanges (DEXs), leveraging smart contracts and liquidity pools, provide peer-to-peer trading platforms free from traditional intermediaries, thereby enhancing market liquidity and transparency.

Cross-chain technology addresses the challenge of exchanging assets and data across different blockchain networks. Through cross-chain bridges, hash time-locked contracts (HTLCs), and relay technologies, seamless interoperability between various blockchain ecosystems is achieved. This integration not only facilitates the global circulation of digital assets but also creates new opportunities for asset trading and utilization.

In conclusion, the integration and interaction of these technologies create a robust ecosystem crucial to blockchain-based digital asset circulation. They serve as key drivers propelling advancements in the blockchain sector. As blockchain technology continues to evolve, these components will play an increasingly vital role in shaping the future digital economy and its asset circulation dynamics.

2.2. Blockchain

Blockchain technology has brought revolutionary changes to the circulation of digital assets through its unique block structure [2,7]. As the basic unit of the blockchain, the block not only ensures the immutability and integrity of the transaction record but also facilitates the traceability of the data through a continuous chain structure. Decentralized trust mechanisms can reduce reliance on centralized institutions thus reducing transaction costs and risks while improving circulation efficiency. Smart contracts [10] provide automated trading for digital asset circulation and simplify the transaction process, while the incentive mechanism encourages more participants to join the network and jointly maintain the stability of the trading system. In addition, the cross-industry application potential of blockchain has further promoted the circulation and innovation of digital assets in a wider range of fields, which has a profound impact on the entire economic system [9]. Therefore, blockchain technology not only enhances the security and transparency of transactions but also injects new vitality into the development of the digital economy, providing a vital role in the circulation of digital assets [1,3].

2.2.1. Basic Structure of Blockchain

Blockchain originated from Bitcoin and is the underlying technology of Bitcoin, first proposed by Satoshi Nakamoto in 2008 [7]. It is a decentralized distributed ledger database that combines distributed data storage, encryption algorithms, and other advanced technologies to provide an open decentralized database for processing transactions related to currency, goods, and property, achieving secure and reliable data exchange.

A blockchain is a chain formed by concatenating blocks, each containing the hash value of the previous block, corresponding timestamp, and transaction information, as shown in Figure 2. This design approach provides two benefits: traceability and immutability [7].

Traceability in a blockchain is achieved because each block stores the hash value of the previous block [11]. This allows any previous block to be found through its hash value, enabling tracing back through the entire chain layer by layer. Immutability is closely linked to the hash algorithm. The hash value of each block is generated by hashing the Merkle root, the hash value of the previous block, and a random number. The hash value, derived from all transactions in a block through sequential hashing, changes if the block’s transactions are modified. This alteration changes the Merkle root, which, in turn, changes the hash value of the block.

In addition to traceability and immutability, blockchain also features distribution and openness [12]. For example, Bitcoin operates as a distributed transaction ledger, with its data spread across numerous nodes worldwide. Moreover, Bitcoin’s transaction data are publicly accessible across the entire network, allowing anyone to view it, rather than being exclusive to a specific company [7]. This transparency is one reason for its popularity. However, there are various types of blockchains, and their characteristics can vary. For instance, consortium chains may not exhibit the same level of openness as public blockchains.

2.2.2. Six Blockchain Layers

Blockchain is composed of six layers of infrastructure: data layer, network layer, consensus layer, incentive layer, contract layer, and application layer [13]. Each layer plays a specific role in promoting the security, efficiency, and transparency of digital assets, as shown in Figure 3.

The data layer encapsulates the underlying data blocks, including all transaction records and related information within the blockchain system. It also involves techniques such as data encryption and timestamps to ensure data security and immutability. Thus, the data layer is the cornerstone of digital asset circulation, providing proof of asset ownership and transactions [13].

The network layer handles tasks such as distributed network formation, data propagation, and verification within the blockchain system. This includes mechanisms for node connection and communication, data broadcasting and synchronization methods, as well as rules and algorithms for data validation. This decentralized dissemination mechanism enables digital assets to circulate quickly and securely without being controlled by a single entity [13].

The consensus layer ensures that all nodes in a blockchain system reach a consensus on data. It encapsulates various consensus algorithms, such as proof of work (PoW) and proof of stake (PoS), to ensure the security and reliability of digital assets circulating on the network [13].

The incentive layer integrates economic factors into the blockchain technology ecosystem. This includes issuance and distribution mechanisms used to incentivize network participants to provide computing power, maintain network security, and verify transactions. Incentive mechanisms are typically implemented through token economy models, such as mining rewards for Bitcoin and gas fees for Ethereum. They encourage participants to validate transactions, thereby supporting the circulation of digital assets [13].

The contract layer is the foundation of the programmable features of blockchain. It encapsulates various scripts, algorithms, and smart contracts. Smart contracts are computer programs that automatically execute contract terms and conditions. They run on the blockchain and can autonomously execute operations based on predefined rules, providing an automated and programmatic trading method for the circulation of digital assets [13].

The application layer encapsulates various use cases and scenarios of blockchain technology. These applications span various fields, including financial services, supply chain management, digital asset trading, and digital identity verification. The application layer provides various blockchain applications and services that directly interact with users, making the circulation of digital assets more convenient and diversified [13].

2.3. Smart Contact

The concept of smart contracts was first proposed by Nick Szabo in the 1990s [14]. He suggested converting contract terms into code, embedding them into software or hardware, and achieving dynamic execution of these self-executing contracts. This approach reduces transaction costs and prevents unexpected anomalies or malicious behavior. In the context of blockchain, smart contracts specifically refer to computer programs executed on the blockchain. These programs can be stored on the blockchain and automatically execute when specific conditions are met. Subsequently, their status is updated on the blockchain and cannot be unilaterally tampered with. Smart contracts simplify the transaction process, reduce the dependence on intermediaries, improve transaction efficiency, lower costs, and promote the widespread application and rapid circulation of digital assets.

The architecture of smart contracts is illustrated in Figure 4. Smart contracts are computer programs running on the blockchain, and their key technological foundation lies in the security and decentralization characteristics of the blockchain platform. For instance, Ethereum provides the necessary infrastructure to enable smart contracts to operate securely in a distributed network. The writing of smart contracts typically uses specific programming languages, such as Solidity, designed specifically for blockchain environments to ensure the accuracy and security of contract logic. Security is one of the most critical considerations in smart contract technology, as any code-level defect can become a security vulnerability that can be maliciously exploited. To address this issue, researchers employ formal verification and other methods to verify the correctness of contract logic through mathematical means, thereby reducing security risks [15].

Another key technology is Oracle, which allows smart contracts to react based on real-world data. In the circulation of digital assets, oracles can provide key data such as market price information and event outcomes, allowing contracts to automatically execute transactions or adjust contract terms based on this information. Privacy protection is also an important aspect of smart contract technology, especially when dealing with sensitive financial transactions or personal data. Protecting user privacy is crucial. The application of zero-knowledge proofs and other cryptographic techniques ensures the effectiveness of transaction verification without compromising user data [16].

2.4. Consensus Protocols

In the circulation of digital assets, consensus mechanisms ensure that all network participants reach a consensus on the consistency and accuracy of transaction records, provide a trust foundation and decentralized transaction verification, enhance the security and tamper resistance of the network, and are crucial for maintaining the authenticity of digital assets and preventing double payments.

Consensus protocols generally fall into two main design approaches. The first approach encompasses proof-based consensus protocols, which are typically utilized in permissionless environments where any node can participate. In these protocols, miners validate a set of transactions, construct a Merkle tree, and package the transactions along with the tree into a new block. A node is selected as the leader via a cryptographic random algorithm to generate the block, which is then broadcast across the network for verification. Nodes validate the new block, and once confirmed through several subsequent blocks, it is appended to the blockchain [17].

Proof-based consensus mechanisms differ primarily in terms of the resources they prioritize, such as computational power, staked assets, or storage capacity. Proof of work (PoW) [18], the earliest and most widely adopted proof-based consensus, relies on computational power, where miners compete to solve complex cryptographic puzzles. This method, however, is associated with high-energy consumption and performance issues, particularly when compared to more energy-efficient alternatives like proof of stake (PoS) and proof of storage (PoStorage). A notable variant of PoW is hybrid PoW (HPoW), which is optimized for low-power devices, addressing some of PoW’s inefficiencies.

In contrast, proof of stake (PoS) [19] eliminates the need for intensive computational power by selecting block validators based on the amount of cryptocurrency they hold and are willing to “stake” as collateral. PoS protocols can be further classified into two main categories: chain-based PoS, which includes well-known variants such as Peercoin, Nxt, SnowWhite, and Ouroboros (Praos, Genesis, Crypsinous), and BFT-based PoS, which integrates Byzantine fault tolerance mechanisms, including protocols like Algorand, Tendermint, Casper, and LaKSA.

Another significant development in proof-based protocols is proof of storage (PoStorage) [20], which shifts the focus to storage capacity as the primary resource. Various forms of PoStorage include proof of replication (PoRep) and proof of space-time (PoSt), both employed by Filecoin, ensuring data replication and proof of storage over time. Additionally, proof of space (PoSpace), used by projects like SpaceMint and Chia, and proof of retrievability (PoR), implemented in Permacoin, demonstrate the adaptability of storage-based consensus mechanisms. These methods collectively aim to leverage storage resources as a more efficient and scalable alternative to computation-heavy methods like PoW.

Lastly, hybrid approaches such as proof of elapsed time (PoET) [17], employed by Hyperledger Sawtooth, and proof of meaningful work (PoMW), which requires participants to perform useful computational tasks, represent emerging trends that aim to improve both the security and sustainability of consensus protocols in decentralized networks.

The second approach includes committee-based consensus protocols [17]. These protocols, derived from classic distributed consensus algorithms, involve nodes voting to decide the next block to be added to the blockchain. For instance, practical Byzantine fault tolerance (PBFT) [21] operates by multicasting a block proposal to participants, who then respond with their status. If a sufficient number of responses are received, a pre-commit phase occurs, and votes are broadcasted to commit the block. Once a threshold of commit responses is achieved, the block is appended to the blockchain of honest nodes [17]. This method relies on participant voting, and while it provides efficiency and scalability, it usually necessitates prior knowledge of participant numbers and is more suited to controlled, permissioned environments.

Furthermore, some blockchains integrate aspects of both protocol types to leverage their combined advantages, exemplified by systems such as Algorand [22], ByzCoin [23], and Elastico [23]. Additionally, there are specialized consensus protocols designed for particular applications, including those addressing resource constraints [24], non-anonymous proof-based models [25], and data redaction needs [26].

Table 1. Comparison of proof-based consensus protocols.

Category	Type	Details
PoW [18]	HPoW (hybrid PoW)	A variant optimized for low-power devices.
	General PoW	High-energy consumption; performance issues compared to PoS and PoStorage.
PoS [19]	Chain-based PoS	Includes Peercoin, Nxt, SnowWhite, and Ouroboros variants (Praos, Genesis, Crypsinous).
	BFT-based PoS	Includes Algorand, Tendermint, Casper, and LaKSA. Combines PoS with Byzantine Fault Tolerance.
PoStorage [20]	Proof of Replication (PoRep)	Used by Filecoin. Ensures data replication across nodes.
	Proof of Space-time (PoSt)	Used by Filecoin. Combines space and time to prove storage capacity.
	Proof of Space (PoSpace)	Includes SpaceMint and Chia. Uses allocated storage space as proof.
	Proof of Retrievability (PoR)	Used by Permacoin. Ensures stored data are retrievable.
	Proof of Capacity	General term for capacity-based proof systems.
PoX [17]	Proof of elapsed time (PoET)	Used by Hyperledger Sawtooth. Uses time elapsed for block production.
	Proof of meaningful work (PoMW)	Requires performing a meaningful task as proof.

provides a comparative analysis of various proof-based consensus protocols, highlighting their key characteristics, advantages, and disadvantages.

Table 2. Comparison of committee-based and other miscellaneous consensus protocols.

Category	Type	Details
Committee-based Consensus Protocols
Permissioned Committee-based [27]	HoneyBadgerBFT	Practical asynchronous BFT protocol.
	BEAT, Dumbo	Improvements on asynchronous BFT consensus protocols.
	PILI, PALA, HotStuff, and Aequitas	Variants with different leader election and broadcast models.
Permissionless Committee-based [27]	ByzCoin, Elastico	Includes the first sharding blockchain consensus protocols.
	RandHound, RapidChain	Focus on cross-shard transaction processing.
	OptChain, BrokerChain	Solutions for inter-shard transactions.
Other Miscellaneous Protocols
Miscellaneous [17]	Tx-based Chain	Includes IOTA, Tangle, Byteball.
	Swirlds Hashgraph	A DAG-based consensus algorithm.
	Hyperledger fabric	A modular blockchain framework.
	DPoS	Delegated proof of stake.
	Non-anonymous proof-based	Includes GoChain (reputation-based).
	Editable blockchain	Allows for blockchain modification.

continues with a comparison of committee-based and other miscellaneous consensus protocols, offering a broader view of consensus mechanisms in blockchain technology. This comparative overview helps elucidate the distinctions and trade-offs among different consensus mechanisms.

2.5. Cross-Chain

After years of development, blockchain technology has produced a large number of blockchain products with different characteristics and suitable for different scenarios on the market. However, due to the isolation of blockchain and the high heterogeneity between links, asset transfer and digital interoperability between existing blockchains have become extremely difficult, and the phenomenon of islands is gradually emerging [28].

Cross-chain technology is a crucial means to achieve blockchain interoperability and scalability. It significantly enhances the flexibility and connectivity of digital asset circulation, enabling interoperability between different blockchains and seamless transfer of assets and data. This capability allows digital assets to flow across multiple platforms and ecosystems, expanding the scope and market of transactions and improving asset liquidity and availability.

Cross-chain refers to the ability of assets originally stored on a specific blockchain to be converted into assets on another chain, thus achieving value circulation. It can also be understood as the exchange between different asset holders, without altering the total value of assets on the blockchain. Furthermore, cross-chain technology has facilitated the development of decentralized finance (DeFi), supporting innovation in new financial products and services. This provides users with a wider range of choices and more efficient services, breaking down barriers between blockchains and offering essential technical support for global transactions and applications of digital assets.

The concept of cross-chain technology gradually formed with the development of blockchain technology. Early cross-chain technologies, represented by Ripple and BTC Relay, mainly focused on the transfer of digital assets. The earliest example dates back to 2012 when Ripple Labs proposed the Interledger Protocol, a cross-payment system protocol capable of secure transfers between different ledgers. This protocol allows two different ledger systems to freely convert currencies through a third-party “connector” [29]. BTC Relay is a cross-chain payment solution based on the Ethereum platform, which verifies transactions on the Bitcoin network through smart contracts on Ethereum [30].

In May 2013, TierNolan first proposed the atomic swap scheme on the Bitcoin forum [31]. This scheme outlined the basic principles of cross-chain cryptocurrency exchanges. When users on two different blockchains exchange assets, no third party is needed. Both parties use smart contract technology and mutually enforced triggers to ensure the atomicity of the asset exchange. In October 2014, Blockstream introduced the pegged sidechain technology [32]. This technology allows for the secure transfer of Bitcoin and other ledger assets between the main chain and other blockchains. The introduction of sidechain technology addresses the issue of low main chain efficiency while ensuring that sidechains are completely independent of the main chain, thus not affecting the main chain’s security and stability.

Current cross-chain technologies, represented by Polkadot and Cosmos, focus on cross-chain infrastructure. In June 2016, Jae Kwon and Ethan Buchman proposed Cosmos [33]. Cosmos introduced the concepts of Hub and Zone, enabling digital asset transfer and communication between different blockchains through inter-blockchain communication (IBC) protocol. In September of the same year, Vitalik Buterin published “Chain Interoperability” [34], providing a comprehensive and in-depth analysis of blockchain interoperability issues. In November 2016, Wood G. proposed the Polkadot project and released the white paper. Polkadot is a multi-heterogeneous chain architecture that supports decentralized, trustless interaction between different consensus systems [35].

Building on these advancements, the core components of cross-chain technology have evolved to include notary schemes, side-chain and relay-chain mechanisms, hash locking, and distributed key management, as illustrated in Figure 5.

2.5.1. Notary Schemes

Notary schemes are relatively straightforward cross-chain mechanisms that achieve cross-chain message verification and forwarding by introducing a trusted third party. Similar to the traditional mode of operation of exchanges, when digital assets are circulated in different blockchain systems, the platform elects one or more organizations as notaries. These notaries automatically monitor events across different chains based on requests, reach a consensus on the occurrence of events through specific consensus algorithms, and respond accordingly [31].

Notary schemes allow for the transfer of digital assets between different blockchains by having a group of trusted nodes (notaries) validate the transactions. This mechanism is crucial for the circulation of digital assets as it provides a relatively simple and decentralized way to ensure the security and validity of transactions. Depending on the signature method, notary schemes can be divided into single-signature notary schemes, multi-signature notary schemes, and distributed signature notary schemes.

Single-signature notary schemes (known as centralized notary schemes) are the simplest cross-chain mechanisms. During cross-chain interactions, a single independent node or institution is designated as the notary to act as the arbitrator for data collection, validation, and transaction confirmation [7]. This type of scheme is highly compatible, has a simple technical architecture, and offers fast transaction speeds, making it commonly used for cross-chain digital asset circulation. However, if the node acts maliciously or is attacked, the security and reliability of the entire system are threatened. Additionally, all participants need to have a high level of trust in this centralized node, which contradicts the decentralized nature of blockchain.

Multi-signature notary schemes involve randomly selecting a portion of notaries from the notary pool to jointly complete the signature using cryptographic techniques, reducing the reliance on the reliability of individual notaries. Typically, the notaries are an alliance of independent nodes or institutions, each holding a key. When a certain proportion of notaries collectively sign and reach a consensus on their respective ledgers, the cross-chain transaction is confirmed [11,31]. Since multiple notaries must sign simultaneously, no single notary can control the entire digital asset transaction process, thereby reducing centralization risks. Even if some notaries are attacked or act maliciously, as long as it is not more than the required signing proportion, the security of the transaction is not compromised, giving the system high fault tolerance. However, coordination and communication among multiple notaries become more complex, requiring effective mechanisms to manage them, and the transaction confirmation time is extended. Additionally, although the risk of centralization is reduced, collusion among multiple notaries could still pose a security threat.

Distributed signature notary schemes are an optimized version of the multi-signature notary scheme, offering higher security and reliability. They use the core idea of multi-party computation (MPC) to ensure the security and privacy of the keys [11,36]. In this scheme, a unique cryptographic key is split into multiple fragments and distributed randomly to selected notaries. Even if all notaries piece together the fragments, they cannot reconstruct the key. Only when a certain proportion of notaries collaboratively complete the signature can the complete key be reconstructed. By splitting the key into multiple fragments and randomly distributing them to notaries, the scheme ensures that even if the key fragments fall into malicious hands, the full key cannot be restored, thus enhancing security. However, implementing the distributed signature notary scheme involves complex cryptographic and multi-party computation techniques, which have high technical barriers. Additionally, the generation, distribution, and combination of key fragments might increase system performance overhead. Effective coordination mechanisms are also required to manage interactions among numerous notaries, ensuring the smooth execution of the signing process.

2.5.2. Side-Chain and Relay-Chain

Digital assets can be transferred quickly via side chains, which optimize transaction speed and cost. Relay chains act as bridges between different blockchains, allowing assets to transfer from one chain to another, thereby extending the circulation range of digital assets.

Side chains/relay chains are a flexible cross-chain solution that allows interoperability and asset transfers between independent blockchain networks, enhancing the liquidity and availability of digital assets. Side chains focus more on the master-slave relationship between chains, while relays are the technology or solution for achieving cross-chain functionality. A side chain is a concept relative to the main chain; there can be many side chains relative to the main chain. Digital assets can transfer between the side chain and the main chain through various two-way pegging mechanisms. When the main chain is unstable, digital assets or related transactions can temporarily transfer to the side chain, alleviating pressure on the main chain and enhancing its performance. Relay chains abstract the cross-chain operation layer from various main chains, reducing the security risks of inter-chain communication, and are suitable for linking two heterogeneous or homogeneous blockchains [37].

There is no strict boundary between side chains and relay chains; they can be customized according to different application scenarios and needs. The advantage of this technology is that it can extend the functions of the main chain while maintaining its security and stability. Through side chain/relay chain technology, different blockchain networks can verify and trust each other’s transaction data, achieving a seamless circulation of digital assets and information, thereby promoting the development and innovation of the entire blockchain ecosystem.

2.5.3. Hash Locking

Hash locking, also known as hash time lock contracts (HTLCs), is a cross-chain technical solution for asset exchange that does not require trusted intermediaries. It achieves security and atomicity in cross-chain asset swaps by combining hash locks and time locks.

In the operation process, the initiating party first generates a random secret value, which serves as the key to unlock the transaction. The initiating party hashes the secret value and shares the resulting hash with the responding party. Subsequently, both parties create smart contracts on their respective blockchains using this hash value, locking their digital assets into the contracts and setting a time limit. Typically, the initiating party sets a longer lock time to ensure sufficient time for the exchange [38]. If both parties can provide the correct secret value to unlock the contract within the predetermined time, the assets are exchanged as agreed. If either party fails to provide the secret within the specified time, the contract allows the other party to reclaim their locked assets. This mechanism ensures transaction security, as only the party possessing the secret value can unlock the assets. Herlihy et al. introduced atomic cross-chain swaps, which utilize hash time locking mechanisms to facilitate cross-chain asset swaps without the need for trusted third-party notaries [12].

A key advantage of hash locking technology is its guarantee that the total amount of assets on the chain remains unchanged, as asset transfers are atomic—either fully executed or not executed at all. However, hash locking is primarily suited for the exchange of assets between blockchains and may not be suitable for broader asset cross-chain transfers.

2.5.4. Distributed Key Management

Distributed key management leverages distributed nodes to control the private keys of various assets within a blockchain system, separating the usage rights and ownership of digital assets. This allows decentralized systems to securely assume control over on-chain assets, while mapping assets from the original chain to cross-chain environments, facilitating asset circulation and value transfer between different blockchain systems [8]. In the context of digital asset circulation, this means that asset control can be dispersed among multiple participants without a single point of control. This enhances asset security and enables complex transaction structures such as multi-signature wallets or asset transfers within decentralized autonomous organizations (DAOs).

The process of managing distributed keys involves deploying new smart contracts based on blockchain protocol-integrated asset templates according to cross-chain transaction information, thereby creating new cryptocurrency assets [39]. When an asset registered on the original chain is transferred to a cross-chain environment, cross-chain nodes issue corresponding tokens within existing contracts to ensure that assets from the original chain remain tradable and usable within the cross-chain environment.

This system enhances security by dispersing control of private keys among multiple nodes, thereby reducing the risk of single points of failure. Additionally, it supports interoperability among blockchain networks, providing liquidity and scalability for the digital economy, and enabling seamless asset transfers between different chains. Moreover, the use of smart contracts adds automation and trustless execution to the process, ensuring that token transfers and issuance follow predefined rules automatically without intermediaries.

2.5.5. Notary Schemes plus Sidechain Hybrid Technology

In addition to the aforementioned four primary cross-chain mechanisms, researchers have also combined notary schemes with sidechains to enhance the performance of cross-chain interactions. Notary schemes plus sidechain hybrid technology integrates the trust of centralized notaries with the flexibility of sidechains, offering an efficient and relatively secure method for digital asset circulation between different blockchain systems. This hybrid approach utilizes a group of independent nodes or organizations acting as notaries to mitigate the risk of single points of failure. It also leverages the independence and smart contract capabilities of sidechains to extend the capabilities of the main chain, achieving faster transaction speeds and lower costs.

An example of the Blockchain 3.0 EOS.IO in the Ethereum Universe adopts the notary schemes plus sidechain hybrid technology for its cross-chain service platform, allowing users to freely transfer and trade digital assets across different blockchain environments [40]. Ren et al. proposed the HCNCT cross-chain transaction scheme based on improved hash time locks, which integrates notary schemes where a group of notaries supervises and participates in cross-chain transactions. This approach effectively addresses issues found in traditional hash time lock methods, such as malicious users creating numerous timeout transactions to block transaction channels [41].

Table 3. Comparison of cross-chain technologies: Notary Scheme, Sidechain/Relay Chain, Hash Locking.

Comparison Dimension	Notary Scheme	Sidechain/Relay Chain	Hash Locking
Security	High	Medium	Medium
Decentralization	Low	High	High
Transaction Speed	Slow	Variable	Fast
Interoperability	Limited	High	Limited
Technical Complexity	Medium	High	Low
Application Scope	Limited	Wide	Limited
Cost	Low	Variable	Low
User Experience	Medium	High	High
Regulatory Compliance	Medium	High	Medium
Typical Application	Digital Identity Verification	Cross-Chain Asset Transfer	Cryptocurrency Exchange

and

Table 4. Comparison of cross-chain technologies: Distributed Key Control, Notary plus Sidechain Hybrid.

Comparison Dimension	Distributed Key Control	Notary Plus Sidechain Hybrid
Security	High	High
Decentralization	High	Medium to High
Transaction Speed	Medium to Fast	Medium
Interoperability	High	High
Technical Complexity	High	High
Application Scope	Wide	Wide
Cost	Medium	Medium to High
User Experience	Medium	High
Regulatory Compliance	High	High
Typical Application	Cross-Chain Asset Custody	Cross-Chain Financial Transactions and Services

presents a comparative analysis of key cross-chain technologies, emphasizing their strengths in security, transaction speed, complexity, and applicability to various use cases. Notary schemes provide a relatively centralized transaction verification method, offering excellent performance in terms of security and cost reduction, especially suitable for scenarios requiring high trust in digital identity verification. Sidechain/relay chain technologies are renowned for their high interoperability and broad application scope, enabling interaction with the main chain through independent chains despite their higher technical complexity. Hash locking offers fast transaction speeds and cost advantages, allowing users direct control over transactions in cryptocurrency exchange scenarios. Distributed key management achieves high security and decentralization by dispersing private key control across multiple nodes, supporting applications like cross-chain asset custody, albeit with higher implementation costs. Finally, hybrid approaches combining notary schemes with sidechain technologies provide secure and flexible cross-chain transaction methods, optimizing user experience and compliance in cross-chain financial transactions and services. These integrated technologies and innovations continue to drive the evolution of digital asset circulation methods, laying a solid technical foundation for constructing a more open and interconnected digital economy.

2.6. Privacy Protection

Privacy protection technology plays a crucial role in the circulation and aggregation of digital assets, especially in personal data management, electronic health records, or systems that interact with any public institution. It ensures that the user’s personal information and transaction data are securely protected during transactions and asset management, preventing unauthorized access and potential data leakage. Through encryption technology, anonymization processing, and privacy protection protocols, digital asset circulation platforms can provide users with higher levels of confidentiality, thereby enhancing their trust in digital asset transactions. In addition, privacy protection also helps to meet the compliance requirements of different jurisdictions for data privacy, reduce legal risks, promote the free flow of digital assets on a global scale, and promote the healthy development of the digital economy.

With the expansion of the demand for digital asset circulation, the challenges of protecting user privacy are becoming increasingly prominent, including transaction linkability, compliance with data protection regulations, on-chain data privacy, and malicious smart contracts. To address these challenges, researchers have proposed various privacy protection solutions based on cryptographic techniques. The key techniques used in privacy protection for blockchain systems are illustrated in Figure 6.

2.6.1. Zero-Knowledge Proofs

Zero-knowledge proofs (ZKPs) are cryptographic protocols that allow a prover to demonstrate the truth of a statement to a verifier without revealing any information beyond the validity of that statement. This technology is particularly crucial in blockchain and digital asset circulation, where it ensures transaction validity while protecting user privacy.

In digital asset circulation, ZKPs facilitate anonymous transactions for cryptocurrency users. For instance, in transactions involving cryptocurrencies like Bitcoin, ZKPs can verify transaction legitimacy without disclosing the identities or amounts involved. This privacy protection is essential as users prefer to keep their transaction history and asset status private. Additionally, ZKPs enable users to transact anonymously while ensuring transaction validity and integrity.

Another significant application of ZKPs is in identity verification systems. In blockchain-based identity management systems, ZKPs allow users to prove their identity or attributes without revealing any personal information beyond the proof itself. For example, the Sovrin project uses privacy-preserving schemes based on ZKPs and decentralized identifiers (DIDs) to create unlinkable anonymous identities and enable selective disclosure of attributes [42].

Furthermore, smart contracts can be designed to accept inputs verified by ZKPs, ensuring that contracts execute based on correct and valid data. This capability is particularly valuable in scenarios where data privacy must be maintained while executing logic based on that data.

Research and development in ZKPs focus on enhancing efficiency and practicality. For instance, ongoing work on succinct non-interactive zero-knowledge proofs (SNARKs) aims to reduce the proof size and simplify verification processes [43]. Platforms like Ethereum have integrated ZKPs into smart contracts, exemplified by tools such as ZoKrates, enabling developers to create pre-compiled smart contracts with built-in verification [44,45].

However, ZKPs face challenges such as resource-intensive proof generation and verification, which may limit their applicability in resource-constrained environments. Moreover, careful design and implementation are essential to prevent potential security vulnerabilities, such as the generation of false proofs [46].

2.6.2. Secure Multi-Party Computation

Secure multi-party computation (SMPC) is an advanced cryptographic technique that allows multiple parties to jointly compute a task while keeping their respective inputs private. It enables collaborative data processing and analysis without revealing individual data. In the realm of digital asset circulation, transactions often involve multiple participants such as buyers, sellers, exchanges, and regulatory bodies. These parties need to verify transaction legitimacy, asset authenticity, and the creditworthiness of the involved parties without disclosing sensitive information. SMPC facilitates these verifications while preserving the privacy of all participants.

SMPC can be utilized for privacy-preserving asset audits. Auditors can verify the total amount of assets and their ownership distribution without accessing specific asset details of the holders. This ensures privacy for asset holders while enhancing audit efficiency and security [47].

Furthermore, SMPC can enhance privacy protection in executing smart contracts. Smart contracts are self-executing contracts whose execution depends on predefined conditions. In complex transactions involving multiple parties, SMPC ensures that smart contracts execute transaction logic correctly without revealing the private inputs of the parties. This capability supports the development of decentralized applications with enhanced privacy protection [48].

Despite the theoretical maturity of SMPC, practical applications face challenges. For instance, SMPC protocols often involve high computational complexity and communication overhead, limiting their deployment in large-scale distributed systems. Additionally, designing and implementing SMPC protocols require careful consideration of various security threats, such as attacks from malicious participants [49]. To address these challenges, researchers are exploring more efficient SMPC protocols and practical deployment strategies. Optimization algorithms and specialized hardware acceleration techniques can significantly improve the efficiency of SMPC protocols. Moreover, formal verification and security audits can enhance the security of SMPC protocols [50].

2.6.3. Homomorphic Encryption

Homomorphic encryption (HE) technology allows specific algebraic operations to be performed on encrypted data without first decrypting it. This means that encrypted data can be used directly for computations, and the results of these computations when decrypted, match those of the same operations performed on the plaintext data. This characteristic enables HE to support functional operations on data while preserving data privacy, making it highly relevant in the field of digital asset circulation.

In digital asset circulation, stakeholders such as asset holders, transaction participants, and regulatory bodies need to ensure transaction transparency and fairness while protecting participants’ privacy. HE enables the verification and processing of transaction data without revealing the identities of transaction parties or the transaction amounts. For instance, in transactions involving cryptocurrencies like Bitcoin, HE can encrypt transaction data and perform transaction verification and asset transfers directly on the encrypted data, ensuring transaction security and participant privacy [51].

A key advantage of HE lies in the types of computations it supports. Fully homomorphic encryption (FHE) allows for arbitrary complex computations to be performed on encrypted data, albeit with efficiency constraints. Researchers also explore somewhat homomorphic encryption (SHE) schemes, which support a limited number of specific types of computations but are more efficient and practical in real-world applications [52,53].

In audits and compliance checks of digital assets, HE allows auditors to verify the total amount and distribution of assets without decrypting the data of asset holders. This enhances audit efficiency while protecting the privacy of asset holders. Additionally, HE can be applied to smart contracts to execute complex logic and computations without revealing participant data [54].

However, the computational efficiency and ciphertext size of HE schemes remain significant factors limiting their widespread adoption. As computation complexity increases, the performance of HE schemes decreases significantly. Researchers are thus focused on developing more efficient HE algorithms and exploring hybrid approaches with other cryptographic techniques to enhance their practicality [54].

Furthermore, security concerns are paramount. With the development of quantum computing, traditional HE schemes may face new security threats. Researchers are therefore investigating post-quantum secure HE schemes to ensure the security of digital assets in future computing environments [55].

2.6.4. Commitment Schemes

Commitment schemes allow participants to commit to data without revealing the specific content. Participants can choose to reveal the data and the proof at a later stage to verify the consistency between the commitment made earlier and the actual data. This mechanism finds applications in various scenarios where data confidentiality and integrity need to be ensured, particularly in the realm of digital asset circulation.

In digital asset circulation, especially in transactions involving cryptocurrencies like Bitcoin, commitment schemes can be used to conceal transaction amounts while ensuring the immutability and verifiability of transactions [56]. The Pedersen commitment scheme, leveraging the homomorphic properties of elliptic curve cryptography, allows users to encrypt transaction amounts and generate a commitment. This commitment does not reveal a specific amount of information during the transaction but can later be verified by disclosing the original amount and the blinding factor used for encryption.

Additionally, commitment schemes are applied in smart contracts, particularly important in complex financial contracts involving sensitive transaction information. Participants may need to verify transaction legality without disclosing specific transaction details.

However, the security of commitment schemes depends crucially on two key properties: bindingness and hiding. Bindingness ensures that once data are committed, they cannot be changed, while hiding ensures that the data remain invisible to outsiders during the commitment period [57]. Careful consideration of these properties is essential in designing and implementing commitment schemes to mitigate potential security vulnerabilities.

2.6.5. Mixing

Mixing was first proposed by Chaum in 1981 [58] and is a technology used to enhance transaction privacy in digital asset circulation. This mechanism hides the sender and receiver information, as well as the communication content, through a third-party intermediary (mixer). During the mixing process, the sender first encrypts the information using the receiver’s public key and then encrypts the resulting ciphertext and the receiving address again using the intermediary’s public key. Upon receiving the encrypted information, the intermediary decrypts it with its private key, removes the outer layer of encryption, and then sends the inner encrypted information to the receiver, who finally decrypts it using their private key to obtain the original information.

In the realm of digital asset circulation, the application of the mixing mechanism is particularly important. Transactions of digital assets, such as Bitcoin and other cryptocurrencies, are publicly transparent on the blockchain, which may lead to user privacy leakage. By using the mixing mechanism, user financial privacy can be effectively protected, preventing transaction activities from being tracked or analyzed. For example, CoinSwap, a mixing protocol based on third-party intermediaries, allows multiple senders and receivers to conduct transactions through a mixer, thereby achieving transaction graph obfuscation and protecting user assets from unauthorized access [59].

However, the mixing mechanism also has some limitations. For instance, if the mixer stores enough transaction records, it might be able to de-anonymize its users. To address this issue, some solutions like MixCoin have adopted signature-based accountability mechanisms to expose potential theft and protect users from mixer abuses [60]. Additionally, CoinJoin, a decentralized mixing technology, protects transaction anonymity by allowing a single transaction to have multiple inputs and outputs, thereby mixing the links between inputs and outputs [61].

Although mixing services are relatively simple in privacy protection and compatible with existing blockchain networks without requiring special consensus mechanisms, their implementation still needs to consider communication and computational overhead. For example, CoinShuffle utilizes anonymous group communication protocols and layered encryption techniques to achieve internal unlinkability, but this comes at the cost of increased communication and computation [62].

2.6.6. Ring Signatures

Ring signatures are a special type of digital signature that provides anonymity for transactions while ensuring the validity of the signature. This signature mechanism was first proposed by Rivest et al. in 2001 [63]. Its core feature is the ability to hide the identity of the signer among a group of possible signers. In a ring signature, a user selects a group of participants, including themselves, and uses their own private key along with the public keys of all participants to generate a signature. Validators can confirm that the message was signed by one member of the group but cannot determine which member actually performed the signing.

In the field of digital asset circulation, users often need to maintain the anonymity of their transaction activities to prevent identity exposure or tracking of transaction patterns. For instance, cryptocurrencies like Monero (XMR) employ ring signature technology to enhance the privacy of user transactions [64]. By using ring signatures, transactions in Monero can obscure the identities of senders, receivers, and transaction amounts, providing a higher level of anonymity for users.

Ring signatures allow users to select a “ring” of participants that includes at least one other user, thereby increasing the anonymity set and making it more difficult to trace specific transactions. This mechanism applies not only to senders but also to receivers, as a fake address can be generated for the receiver to further conceal the transaction destination.

Furthermore, a key advantage of ring signatures is their traceability. Certain variants, like traceable ring signatures, can to some extent restrict double-spending and other fraudulent activities by detecting whether two signatures were generated by the same person [65,66]. This is beneficial for financial systems that require some level of oversight, as it provides regulators with the necessary tools to prevent and track illicit activities while protecting user privacy.

However, generating ring signatures requires relatively high computational resources, which can impact transaction efficiency. Additionally, as the number of participants increases, the size of the ring signature also grows, potentially limiting its practicality in large-scale systems. These challenges are expected to be addressed with advancements in cryptography and computing technology.

2.6.7. Differential Privacy

Differential privacy is a mathematical framework proposed by Cynthia Dwork in 2006 to protect individual privacy in data analysis [67]. It achieves privacy by introducing randomness into the dataset, ensuring that the output of an algorithm remains almost insensitive to the presence or absence of any single record in the dataset. This means that even if a record is added or removed from the dataset, the probability distribution of the algorithm’s output changes minimally, thus protecting individual identities from being identified.

At the core of differential privacy is the concept of privacy budget $ϵ$, which quantifies the extent to which an algorithm may invade individual privacy. A smaller $ϵ$ value indicates higher levels of privacy protection but may sacrifice some data utility. Differential privacy algorithms achieve privacy protection by adding Laplace noise, Gaussian noise, or other types of randomness calibrated to the privacy budget [67].

In the field of digital asset circulation, with the development of blockchain technology, while transaction transparency and tamper resistance are ensured, there is a risk that user identities and transaction behaviors could be analyzed and traced, threatening user privacy. Differential privacy allows for statistical analysis and pattern recognition of transaction data without revealing specific transaction details. This capability is highly valuable for regulatory agencies, market analysts, and researchers [68]. For example, in market trend analysis or regulatory compliance checks, differential privacy can be used to release statistical data reflecting the overall health of the market while protecting the privacy of individual participants. Additionally, differential privacy can be applied to query functions on blockchain platforms, enabling users to query aggregate data without exposing specific details of individual transactions.

However, balancing privacy protection and data analysis needs, as well as maximizing data utility while preserving privacy, remains a critical challenge. The selection of the privacy budget requires domain expertise and experimental adjustments to strike the right balance between privacy protection and data analysis requirements.

2.7. Decentralized Exchange

Decentralized exchange (DEX) is a peer-to-peer trading market where users can trade and manage cryptocurrencies directly, bypassing traditional intermediaries such as banks, brokerages, or payment systems. DEX executes asset trades using blockchain smart contracts.

Traditional financial transactions often lack transparency and rely on intermediaries, whose operations are often not publicly disclosed. In contrast, DEX offers complete transparency of fund flows and trading mechanisms. Moreover, since transactions do not pass through third-party cryptocurrency wallets, DEX can reduce counterparty risks and systemic centralization risks within the cryptocurrency ecosystem. This approach effectively lowers transaction costs, improves transaction speeds, and mitigates risks associated with centralized exchanges, such as hacking attacks or operational failures. Additionally, decentralized trading does not rely on a single controlling entity, thereby enhancing transparency and fairness in the digital asset trading market [7].

DEX encompasses various design patterns, with each pattern having its own advantages and disadvantages in terms of functionality, scalability, and decentralization. The two most common types include order book-based DEX and automated market maker (AMM). DEX aggregators are also common, allowing users to search for the best execution prices or lowest gas fees across multiple chain-based DEX platforms to better meet their trading needs.

2.7.1. Automated Market Maker-Based DEX

An automated market maker (AMM)-based DEX is currently one of the most popular forms of decentralized exchanges (DEXs). Unlike traditional order book matching mechanisms, AMM uses algorithms to determine asset prices and maintains price stability using a so-called conservative function, as shown in Figure 7. Liquidity providers (LPs) earn transaction fees by depositing assets into liquidity pools, allowing traders to interact directly with these pools without needing to find counterparties.

The basic concept of an AMM originates from the logarithmic market scoring rule (LMSR), which uses predefined mathematical functions (often a constant function market maker, CFMM) to automatically determine asset prices and liquidity for trading pairs. This mechanism eliminates the need for traditional order books and manual market makers, relying instead on LPs who provide liquidity by depositing assets into pools in exchange for a share of transaction fees [69].

The earliest application of AMM can be traced back to Uniswap v1, which achieved seamless asset swaps using the constant product formula ($x\times y=k$) [70]. Subsequent versions like Uniswap v2 and v3 have expanded and optimized this model. For instance, Uniswap v3 introduced concentrated liquidity and multiple fee tiers, allowing LPs to provide liquidity in specific price ranges based on their risk preferences, thereby enhancing capital efficiency.

As AMM has become more widespread, various market-making algorithms have emerged, such as Constant Sum and Constant Mean, tailored to different asset types and market demands. The DODO proactive market maker (PMM) model adjusts price slippage to control trading prices closer to market prices, reducing impermanent loss [71]. Additionally, the Kyber network’s dynamic market maker (DMM) enhances capital efficiency and trading slippage flexibility through virtual balances and dynamic fee adjustments [72].

In academic research, Angeris and Chitra conducted detailed analyses on improved price oracles and Constant Function Market Makers, proposing various optimizations to enhance trading efficiency and market stability [73]. Furthermore, Jumadinova et al. compared different AMM strategies and found that reinforcement learning-based AMMs can maintain low spreads while achieving higher utility [69].

The success of AMM not only lies in its technological innovations but also its economic incentive mechanisms. LPs earn transaction fees by providing liquidity to trading pairs, encouraging more users to participate in liquidity pools. Arbitrageurs adjust asset ratios within pools to eliminate price deviations, thereby maintaining market price stability and ensuring liquidity and price discovery functions in the digital asset trading market.

2.7.2. Order Book Based DEX

A DEX based on an order book operates by maintaining a public ledger of buy and sell orders to facilitate trade matching. Unlike automated market makers (AMMs), order book-based DEXs draw inspiration from traditional centralized exchanges but enhance decentralization and security using blockchain technology. This model (as shown in Figure 8) has distinct advantages and technical implementations, focusing on order book management, matching engines, on-chain settlement, and user privacy protection.

The core of an order book-based DEX is its decentralized order book management system, which records and manages all user buy and sell orders on the blockchain through smart contracts. Each order includes details such as user addresses, trading pairs, order quantities, and prices. Implementing such a decentralized order book requires efficient storage and retrieval mechanisms to ensure performance and reliability in high-frequency trading environments [74].

A crucial component of an order book-based DEX is the matching engine. It is responsible for matching buy and sell orders according to predefined rules and generating corresponding trade pairs. The matching engine can operate on-chain or off-chain, or through a hybrid approach. On-chain matching ensures transparency and tamper resistance but may face performance bottlenecks. Off-chain matching can significantly improve efficiency but requires additional trust mechanisms to ensure fairness and security of the matching results [74].

On-chain settlement is the final step in executing trades on an order book-based DEX. During this process, smart contracts execute the trade pairs generated by the matching engine, transferring and confirming assets on the blockchain. On-chain settlement ensures transparency and security, allowing any user to verify the authenticity of trades. Additionally, on-chain settlement can be combined with off-chain matching using technologies like zero-knowledge proofs to ensure the security of off-chain matching [74].

User privacy protection is a significant concern for order book-based DEXs. In traditional order book models, all order information is publicly visible, potentially exposing user trading behaviors to analysis. To safeguard user privacy, order book-based DEXs can employ various techniques such as address mixing, ring signatures, and privacy transaction protocols. These technologies effectively conceal user trading details, thwarting malicious analysis and attacks [74].

Compared to the AMM model, order book-based DEXs offer unique advantages in market liquidity, price discovery, and user experience. By centralizing matching mechanisms, order book-based DEXs can provide better price discovery and deeper market depth, especially notable in high-volume markets. Furthermore, order book-based DEXs allow users to set limit orders, stop-loss orders, and other advanced trading instructions, providing professional traders with more operational flexibility and strategic options [69].

2.7.3. Aggregator DEX

Decentralized exchange aggregators (DEX aggregators) are emerging decentralized trading platforms that integrate multiple liquidity sources to offer users optimal trade prices and lower transaction costs, as shown in Figure 9. The design philosophy of these DEXs aims to provide a seamless trading experience while leveraging the economies of scale offered by decentralized networks [75].

The operational principle of aggregator DEXs is relatively straightforward yet efficient. They use smart contracts to automatically access and compare liquidity pools from various DEXs, including AMM-based DEXs and other types of DEXs, to find the best trade paths. When a user initiates a trade request, the aggregator analyzes real-time quotes from different DEXs, considering factors such as liquidity for the trading pairs, price slippage, and transaction fees, and then selects the optimal trade execution path [76].

The advantages of these DEX aggregators lie in their ability to significantly enhance trading efficiency and cost-effectiveness. Users can benefit from lower trading slippage and increased liquidity because aggregators can allocate trade volumes across multiple DEXs. Additionally, aggregator DEXs can mitigate so-called “sandwich attacks”, where malicious traders manipulate prices by inserting their own orders before and after user buy/sell orders [75].

2.7.4. Other Common DEX

In addition to the common designs of decentralized exchanges (DEXs) mentioned above, there are several other common types: Oracle-driven DEXs rely on external data sources to execute transaction conditions or determine asset prices [77]. This type of DEX (as shown in Figure 10 is particularly important for complex financial products that require off-chain data input, such as derivative trading or prediction markets. Customized or specialized DEXs are designed specifically for certain asset categories or transaction types. For example, Curve specializes in stablecoin trading, offering low slippage and high efficiency [78]. These DEXs optimize specific trading pairs or asset categories to provide more professional services. Cross-chain DEX allows users to exchange tokens across different blockchains, leveraging cross-chain technology to overcome the limitations of individual blockchains [9]. Through cross-chain bridging technology, DEXs can connect different blockchain networks for seamless asset transfer and trading. Derivative DEXs focus on trading financial derivatives like options, futures, and swaps, bringing complex financial instruments from traditional markets to the decentralized world [79]. This enables users to employ diversified trading strategies. Layer 2 DEX solutions utilize technologies such as optimistic rollup or ZK-rollup to enhance transaction speed and reduce costs [80]. These DEXs process transactions on Layer 2 and then submit results to the main chain, addressing congestion and high fees on networks like Ethereum. Privacy-preserving DEXs employ advanced encryption technologies like zero-knowledge proofs to hide transaction details such as amounts, participant identities, or transaction histories [81]. These DEXs offer users enhanced privacy protection, facilitating transactions without exposing user information.

3. Case Analysis and Application

The analysis and application of key technologies in digital asset circulation provide critical insights into their practical implementation and impact on the financial ecosystem. This paper explores real-world applications and case studies to deepen our understanding of how these technologies facilitate secure, efficient, and transparent transactions. Section 3.1 discusses the application and analysis of smart contracts, highlighting their role in automating and enforcing agreements without intermediaries. Section 3.2 examines the application and analysis of consensus algorithms, essential for maintaining the integrity and security of blockchain networks. Section 3.3 focuses on the application and analysis of cross-chain technology, crucial for enabling seamless asset transfers across different blockchain ecosystems. Section 3.4 addresses the application and analysis of privacy protection technologies, ensuring confidentiality and security in digital asset transactions. Finally, Section 3.5 explores the application and analysis of decentralized exchanges, which provide platforms for peer-to-peer trading without the need for intermediaries. Through these sections, we aim to elucidate the practical implications and benefits of these technologies in the evolving landscape of digital asset circulation.

3.1. Application and Analysis of Smart Contract

In the circulation of digital assets, the application of smart contracts can widely cover various asset categories, including but not limited to cryptocurrencies, digital art, intellectual property, and other forms of virtual goods [82]. By encoding the ownership and transaction conditions of assets into smart contracts, once the preset conditions are met, the transfer of assets and related rights changes will be automatically executed without the intervention of intermediaries. While improving transaction efficiency, it also increases the transparency and traceability of transactions [14,83,84].

3.1.1. Financial Currency

The application of smart contract technology in the field of monetary finance has brought profound changes to traditional financial models. These digital protocols leverage blockchain’s decentralization, transparency, and immutability, providing a secure and efficient new platform for financial transactions [84].

In the realm of financial derivatives, smart contracts can automatically execute complex trading strategies based on market conditions. For instance, an option contract based on commodity price fluctuations can be programmed into a smart contract [85]; when the market prices meet predefined execution conditions, the contract executes automatically, thus providing investors with a decentralized hedging tool without intermediaries.

The bond market also benefits from the application of smart contracts. By encoding bond terms into smart contracts, investors can ensure automatic repayment of principal and interest upon maturity, enhancing transaction efficiency and reducing default risks [82,83].

Market data integration is another key application of smart contracts in finance. Smart contracts can connect to multiple data sources, obtain real-time market information, and provide accurate data support for asset pricing and trading decisions [15,82].

In remittance services, smart contracts can offer fast, low-cost cross-border payment solutions. Through smart contracts, remittances can settle in real-time, leveraging blockchain networks to reduce transaction costs and enhance transaction security [15].

The rise of tokenized assets has opened up new frontiers for smart contract applications in finance. These tokenized assets represent various real-world assets such as real estate and art, enabling their trading and transfer on blockchain. Smart contracts play a crucial role in ensuring the automatic execution of transactions and clear ownership transfer [10].

Decentralized exchanges (DEXs) are another significant application scenario for smart contract technology. Compared to traditional exchanges, DEXs provide a trustless trading environment where all transactions are automatically executed via smart contracts, thereby reducing transaction costs and risks. This decentralized trading platform offers users a higher level of asset security [16].

3.1.2. Payments

The application of smart contract technology in the field of payments marks a revolutionary advancement in payment systems. Leveraging blockchain’s decentralized nature, smart contracts provide a secure, transparent, and efficient transaction execution platform for bank payments, retail payments, and cryptocurrency transactions [86].

In the realm of bank payments, smart contracts simplify transaction processes and reduce the complexity and costs of cross-border payments. Smart contracts can automatically verify the identities and account statuses of transaction parties, execute atomic transactions, and ensure timely fund transfers. This automated payment processing not only enhances transaction speeds but also reduces risks arising from human errors [87].

In the retail payment industry, the application of smart contracts enables more flexible and convenient payment options for consumers. Merchants can utilize smart contracts to create customized payment solutions, including loyalty rewards, automatic subscription services, and instant refunds, among others. These smart contracts can automatically execute based on predefined conditions, thereby enhancing efficiency and improving user experience in retail payments [82].

Cryptocurrency payments represent another significant application scenario for smart contract technology. Smart contracts serve as bridges connecting cryptocurrencies with traditional currencies, facilitating conversions and transactions between different currencies. Furthermore, smart contracts enhance the security and transparency of cryptocurrency transactions, bolstering user trust in digital currency payment systems [82].

3.1.3. Insurance Industry

The application of smart contract technology in the insurance industry heralds a transformation in service models. Through smart contracts, the automation of insurance claims processes becomes possible, significantly enhancing efficiency, reducing fraud, and lowering operational costs [13].

In the realm of auto insurance, smart contracts can integrate with the Internet of Things (IoT) devices to monitor vehicle conditions and driving behavior in real-time. For instance, by analyzing GPS data and sensor information from vehicles, smart contracts can automatically calculate premiums and swiftly process claims in the event of an accident [68].

For home insurance, smart contracts can utilize data from smart home systems such as surveillance cameras and environmental sensors to assess property damage and trigger claims processes. This streamlines and ensures fairness in the home insurance claims process [13].

In life and health insurance, the application of smart contracts can use personal medical records and health data to determine the execution of insurance terms. This not only enhances the personalization of life insurance but also helps health insurance companies offer customized insurance products based on actual health conditions of customers [13].

Automating aviation insurance processes is another application scenario for smart contract technology. By accessing real-time flight status data, smart contracts can automatically detect flight delays or cancellations and pay insurance claims to affected passengers based on predefined conditions [83,85].

In large equipment insurance and reinsurance sectors, smart contracts can monitor equipment operational status and maintenance history to assess risks and automatically handle claims. This improves risk management capabilities for insurance companies and provides more accurate risk assessment tools for reinsurers [13].

Crop insurance can utilize smart contracts and information from satellite images, climate data, and other sources to assess crop losses and automatically distribute compensation. This application helps agricultural insurance more accurately respond to the impact of unpredictable events such as natural disasters [83].

The application of smart contracts in the insurance industry not only focuses on improving efficiency and reducing costs but also enhances competitiveness by providing more precise risk assessment and claims decision-making [13].

3.1.4. Enterprise Systems

The application of smart contract technology in enterprise systems provides an innovative solution for businesses to optimize workflows, enhance data management capabilities, and improve operational efficiency. Through smart contracts, enterprises can achieve automated execution of business rules, reducing manual intervention, lowering costs, and enhancing transaction speeds [15].

In the realm of cloud services, smart contracts can integrate with cloud platforms to offer flexible data processing and storage solutions for enterprises. Smart contracts can securely execute within cloud environments, ensuring data integrity and compliance while providing automated resource allocation and management [15].

Under the software as a service (SaaS) model, smart contracts can be embedded into various enterprise applications such as customer relationship management (CRM) and enterprise resource planning (ERP) systems. These smart contracts can automatically execute tasks based on predefined business logic, including order processing, inventory management, and financial settlements, thereby enhancing enterprise responsiveness and service quality [82].

Trusted execution environments (TEEs) provide a secure data execution space for smart contracts. Smart contracts running within TEEs protect sensitive data from unauthorized access while ensuring the correct execution of business logic, which is crucial for enterprises requiring high data confidentiality [15].

Database management is a core part of enterprise informatization. Smart contracts can integrate with enterprise databases to automate data management and maintenance. Through smart contracts, enterprises can ensure data consistency, accuracy, and traceability while automating routine data operation tasks [15,82].

Blockchain as a Service (BaaS) is an emerging cloud service model that allows enterprises to easily deploy and manage blockchain applications. The application of smart contracts on BaaS platforms enables enterprises to rapidly build decentralized business processes and transaction systems, thereby enhancing transparency and trustworthiness [82,83].

3.1.5. Supply Chain

The application of smart contract technology in supply chain management represents a crucial direction for supply chain innovation. Leveraging blockchain’s decentralization and transparency, smart contracts provide an efficient and reliable solution for optimizing the entire process from raw material procurement to product delivery [82].

In terms of quality control, smart contracts can integrate with Internet of Things (IoT) devices to monitor product status and quality in real-time. These devices can detect if products are stored in appropriate conditions or if they sustain damage during transportation. Upon identifying quality issues, smart contracts can automatically execute compensation or recall procedures, ensuring the rights of consumers and manufacturers are protected [82].

Trade finance is another critical aspect of the supply chain where smart contracts simplify the financing process and reduce costs. Through smart contracts, buyers and sellers can establish trust mechanisms to ensure funds automatically flow after meeting specific conditions, thereby speeding up transactions and reducing risks [82].

In the utilities sector, smart contracts facilitate efficient allocation and management of resources. For instance, in internet and telecommunications services, smart contracts can automatically bill based on user usage, offer more flexible payment plans, and ensure service providers receive payments promptly [82].

The power industry can achieve more refined energy management through smart contracts. Smart meters record users’ energy consumption data, and smart contracts automatically calculate electricity bills and process payments accordingly. They can also incentivize users to consume more energy during low-demand periods or reduce usage during peak hours [82].

In water resource management, smart contracts monitor water usage to ensure the rational distribution and utilization of water resources. By recording water usage through smart water meters, smart contracts can adjust water prices automatically based on usage, promoting water conservation and protection of water resources [82].

Emission and waste management are crucial aspects of environmental protection. The application of smart contracts in this field enhances transparency and efficiency in waste disposal. By tracking the origin and processing of waste, smart contracts ensure proper waste management and automatically execute payments for related costs based on processing outcomes [82].

3.1.6. Government

The application of smart contract technology in the government sector demonstrates its potential to enhance public service efficiency, improve transparency, and promote citizen participation. Through smart contracts, governments can automate administrative procedures, reduce human errors, and ensure the security of all transactions and records through blockchain’s immutability [82,83].

In regulatory fields, smart contracts can automatically execute compliance checks and reporting, thereby streamlining government oversight of businesses. For example, environmental regulatory agencies can use smart contracts to monitor companies’ emission levels. Upon detecting violations, smart contracts automatically trigger fines or other compliance measures. This automated regulatory mechanism not only improves efficiency but also ensures consistency and fairness in regulatory enforcement [82].

Voting elections represent another significant application scenario for smart contracts. Through blockchain technology, smart contracts provide a secure and transparent voting platform. On this platform, each citizen’s voting rights are verified, and the voting process is recorded in real-time and publicly accessible, ensuring the fairness and tamper-proof nature of elections. Furthermore, smart contracts can automatically calculate voting results, reducing errors and time costs associated with manual counting [82].

Citizen identity management is another critical application of smart contract technology. Smart contracts can be used to create digital identity systems where citizens’ identity information is securely stored on the blockchain, protecting personal privacy and enhancing identity verification efficiency. Such systems can be utilized for various government services such as social security, healthcare, and education, ensuring accurate service delivery and protecting citizens’ rights [82].

3.1.7. Identity Verification

The application of smart contract technology in identity verification provides an innovative solution to ensure the security of transactions and interactions. By encoding identity verification logic into smart contracts, automated verification processes can be implemented, enhancing efficiency and reducing fraud risks [82,85].

In the field of electronic signatures, smart contracts can integrate with electronic signature service providers to verify the validity of signatures and enforce related contract terms. This creates a secure and reliable execution environment for electronic contract signing, ensuring the legal enforceability and automation of contract execution [85].

The combination of biometric technology with smart contracts offers a more precise method for identity verification. Smart contracts can utilize biometric data such as fingerprints, facial recognition, or iris scans to verify individual identities. This verification method not only enhances security but also provides users with a more convenient verification process [82,83].

Referencing statistical data can provide smart contracts with the external information necessary to verify contract outcomes. For example, smart contracts can use statistical data to verify the validity of insurance claims or provide accurate data support in copyright revenue distribution [82].

Verification of certificates and intellectual property rights is another important application of smart contracts in identity verification. Smart contracts can be used to verify the authenticity of professional qualification certificates and protect the rights of intellectual property owners. Through smart contracts, copyright authorization and royalty payments can be automated, ensuring that creators receive their rightful returns [82].

Open-source project bounties represent another innovative application of smart contract technology. Within open-source communities, smart contracts can be used to reward developers who contribute to projects. Through smart contracts, contributors can automatically receive rewards based on the acceptance of their submitted code, fostering a decentralized incentive mechanism to encourage more developers to participate in open-source projects [82].

3.1.8. Other

Smart contract technology demonstrates significant potential in various areas of digital asset circulation, including data commercialization, satellite imagery with artificial intelligence, time management, cloud hosting services, real estate, wage payments, and decentralized autonomous organizations (DAOs) [82].

In data commercialization, smart contracts provide an automated and transparent way to trade data. Enterprises can securely share and sell data while ensuring compliance with data usage and fair distribution of benefits. This automated data trading mechanism not only enhances data liquidity but also introduces new models for data commercialization.

In the field of satellite imagery and artificial intelligence, smart contracts can integrate with geographic information systems (GISs) and remote sensing technologies to provide precise data analysis and management for industries such as agriculture, urban planning, and environmental monitoring. AI algorithms analyze satellite imagery data, and smart contracts automatically execute corresponding contract terms based on the analysis results, such as triggering insurance claims or adjusting resource allocation [85].

Time management is also crucial in smart contracts. Smart contracts can set specific time conditions for automatically executing contracts, reminding users, or initiating other related operations. This time-triggered mechanism provides convenience for various business processes that require time control.

Regarding cloud hosting services, smart contracts can automate the execution of service level agreements (SLAs). By monitoring real-time performance metrics of cloud services, smart contracts can automatically compensate or adjust resource allocation if the service fails to meet standards, ensuring service quality and customer satisfaction [85].

In the real estate industry, smart contracts can automate property transactions and management processes. From property purchases and leases to property management, smart contracts provide transparent and efficient solutions, reducing transaction costs and minimizing disputes [82].

In wage payment systems, smart contracts can automate salary payments. Based on employees’ work performance, working hours, or project completion, smart contracts ensure timely and accurate payment of wages, supporting multiple currencies and payment channels [82,83].

Decentralized autonomous organizations (DAOs) represent an innovative application of smart contracts in organizational management. DAOs use smart contracts to automate and decentralize organizational governance, allowing members to participate in organizational decision-making through token holding and voting, collectively advancing organizational goals [69].

3.2. Application and Analysis of Consensus Algorithms

In the field of digital asset circulation, consensus algorithms play a crucial role. They not only ensure the legality and correctness of transactions but also establish rules for block generation, create mining reward mechanisms, and enhance system fault tolerance [17,88].

3.2.1. Verification of Transaction Legitimacy and Correctness

Consensus algorithms play a crucial role in verifying the legitimacy and correctness of transactions in blockchain networks like Bitcoin and Ethereum. Bitcoin’s proof of work (PoW) requires miners to solve complex mathematical problems to validate transactions and prevent double-spending [7]. Ethereum’s proof of stake (PoS) mechanism uses validators staking Ether to participate in the consensus process, ensuring transaction and smart contract legitimacy [89].

3.2.2. Establishment of Block Generation Rules

Consensus algorithms define how blocks are created, validated, and added to the blockchain, ensuring orderly block generation. Bitcoin’s longest chain rule maintains blockchain continuity and consistency during forks [7,90]. Ethereum’s Casper FFG algorithm combines PoS and PoW to manage block generation and handle forks [89].

3.2.3. Creation of Miner Reward Mechanisms

Consensus algorithms establish mining rights and related rewards for miners, incentivizing their participation in maintaining blockchain security and functionality. Miners in public chains like Bitcoin earn new coins and transaction fees as rewards for mining [7]. Ethereum miners validate blocks and execute smart contracts to earn Ether rewards [89], whereas, in consortium or private chains, pre-selected nodes may not require such reward mechanisms [90].

3.2.4. Prevention of Malicious Behavior and Cost Increase

Consensus algorithms employ mechanisms to deter malicious activities and increase the cost of malicious behavior. Bitcoin’s PoW consensus consumes significant computational power, making malicious activities costly and safeguarding the blockchain’s security [7,91]. Ethereum’s PoS consensus requires validators to stake large amounts of Ether, increasing the cost of malicious behavior [89].

3.2.5. Leader Election and State Replication

In distributed systems, consensus algorithms resolve leader election and state replication issues, ensuring agreement among nodes despite network failures or partitions. For example, the Raft consensus algorithm elects a leader to manage log replication, ensuring consensus across all nodes [92].

3.2.6. Enhancement of System Fault Tolerance

Consensus algorithms provide a method to distribute state machines across a cluster of computing systems, ensuring that each node agrees on a series of state transitions. This enhances system fault tolerance and reliability. Paxos and Zookeeper’s ZAB protocol are examples used to achieve consensus and ensure reliability in distributed systems [93,94].

3.3. Application and Analysis of Cross-Chain Technology

In the field of digital asset circulation, the application cases of cross-chain technology demonstrate the enormous potential of blockchain interconnectivity.

3.3.1. Cryptocurrency Transactions

Cross-chain technology facilitates interoperability between different blockchain networks, enhancing cryptocurrency transactions. The interchain framework proposed by Ding et al. [95] utilizes sub-chains and intermediary chains to support interoperability between heterogeneous blockchain operations. Atomic swap protocols like SuSy [96], which are based on Gravity and smart contracts, provide secure asset transfers across different blockchains, enhancing transaction security and trust.

3.3.2. Decentralized Finance (DeFi)

In decentralized finance, cross-chain smart contracts play a crucial role. Daghe et al. [10] demonstrated interoperability between two Ethereum networks using smart contracts. Li et al. [97] introduced the concept of satellite chains managing independent sub-chains with different consensus algorithms, supporting asset transfers, and parallel heterogeneous algorithm execution. Liu et al. [33] proposed the universal interoperability protocol (UIP) using innovative insurance smart contracts (ISCs) and network state blockchains (NSBs) to support decentralized application construction and execution across heterogeneous blockchain networks.

3.3.3. Supply Chain Finance

Multi-chain consensus protocols are particularly important in supply chain finance. Feng et al. [98] designed the proof-of-DiscTrust (PoDT) cross-chain consensus protocol to address diversified miner behavior (DMB) attacks, integrating DiscTrust to assess trust values of users across different chains. PANG [99] introduced the multi-token proof-of-stake (MPoS) consensus to enhance relay asset security in cross-chain environments. Robinson [100] analyzed properties maintained by authorized and unauthorized chains during cross-chain communication using consensus protocols.

3.3.4. Asset Swapping and Transfer

The cross-chain technology is pivotal in facilitating the exchange and transfer of diverse digital assets among various blockchain projects. This includes the exchange of public chain digital assets (tokens), digitized assets from consortium or private chains, such as tangible assets like gold, and oil, as well as intangible assets like securities and stocks. Wang et al. [101] proposed a blockchain router cross-chain solution enabling asset exchange between different blockchain systems using validators, monitors, nominators, and connectors. Kan et al. [102] developed a modular framework supporting information exchange among arbitrary blockchain systems through architecture layers: foundational, blockchain, multi-chain communication, and application layers.

3.3.5. Data Sharing

Data sharing involves evidential data stored on-chain (e.g., proof data, on-chain certificates) and retrievable data stored off-chain (e.g., indexing data, raw data). AnLink [95] introduced an enterprise-level blockchain architecture using AnnRouter and AnnChain, connecting multiple blockchains via inter-chain communication protocols to facilitate effective data sharing.

3.3.6. Business Collaboration

Business collaboration entails sharing business data, linking business logic, and complementing business scope across different blockchain systems. Ding et al. [95] utilized the Interchain framework with sub-chains and intermediary chains to support not only asset transfers between blockchains but also to enhance business collaboration capabilities.

3.4. Application and Analysis of Privacy Protection Technologies

Privacy protection technologies not only enhance transaction security but also effectively increase user trust in the system. The application of privacy technologies in digital asset circulation spans across multiple domains, including self-sovereign identity (SSI), Internet of Things (IoT), smart cities, eHealth, and cryptocurrencies [44].

3.4.1. Self-Sovereign Identity

Self-sovereign identity (SSI) allows users to fully control their digital identity information on the blockchain. Compared to traditional centralized identity management systems, SSI provides a decentralized solution that enables users to prove the validity of their identity while protecting their privacy [103]. This identity management system is particularly crucial for digital asset circulation, as it ensures secure and private identity verification processes for transaction parties.

3.4.2. Internet of Things and Smart Cities

As more devices and services connect to networks, protecting user data and privacy becomes increasingly critical. Blockchain technology combined with privacy protection technologies such as secure multi-party computation (SMPC) and homomorphic encryption (HE) provides a secure way for smart cities to manage and exchange data. This is particularly important in sectors like healthcare, home automation, energy, and transportation [104,105,106].

3.4.3. eHealth

Privacy protection technologies show significant potential in the data circulation of eHealth, improving the management of personal health records and providing more effective and customized healthcare services. The Estonian government has enhanced the security of its eHealth system through decentralization and data immutability [64]. However, given the sensitivity of health data, appropriate privacy protection measures must be implemented to prevent potential privacy breaches.

3.4.4. Cryptocurrencies

Cryptocurrencies are some of the most well-known applications of blockchain technology, potentially representing the future of global payments and remittances. In this field, protecting the privacy of transaction parties and hiding the amount of currency transferred is crucial. Existing privacy-enhancing cryptocurrency solutions such as CoinShuffle, CoinJoin, Zerocash, and Ring Confidential Transactions are designed to facilitate transactions without compromising privacy [107]. Despite various innovative privacy protection proposals, existing systems still face numerous privacy challenges, necessitating new research initiatives to improve the efficiency, privacy usability, and control capabilities of current mechanisms. This will enable blockchain to fully meet privacy requirements and provide stronger privacy attributes [85].

3.5. Application and Analysis of Decentralized Exchanges

Decentralized exchanges play a crucial role in the circulation of digital assets, enabling secure and efficient asset transactions through blockchain technology and smart contracts while ensuring privacy and data security for both parties involved. Unlike traditional centralized exchanges, decentralized exchanges operate without relying on intermediaries to manage user assets or execute trades. Instead, they utilize distributed networks and decentralized structures to foster transparent and fair transactions. This model not only enhances trust in transactions but also provides a more open and borderless platform for digital asset trading worldwide, driving the globalization and decentralization trends in digital asset circulation [87].

3.5.1. Cryptocurrency Trading

Decentralized exchanges (DEXs) play a crucial role in digital asset circulation by offering a trustless framework that allows users to engage in peer-to-peer transactions without the control of centralized entities. This setup not only reduces counterparty risks but also significantly lowers transaction costs. For example, platforms like Uniswap enable users to exchange Ethereum and ERC-20 tokens without paying high transaction fees or worrying about asset security issues. Moreover, users maintain full control over their assets; on platforms like SushiSwap, they can participate in liquidity mining, earning transaction fees and platform token rewards without the risk of assets being controlled or frozen by centralized exchanges [70].

On DEX, the application of smart contracts ensures automated and transparent transactions. Taking Uniswap’s automated market maker (AMM) model as an example, it determines asset prices through a constant product formula, allowing users to trade without an order book. This mechanism not only enhances transaction efficiency but also ensures transaction atomicity and irreversibility; once executed, transactions are immediately confirmed on the blockchain and cannot be altered or revoked [69].

3.5.2. Token Issuance and Financing

The issuance of new assets is another critical area for DEX. The decentralized nature of blockchain technology provides an open and accessible platform for creating and issuing new assets. Through initial coin offerings (ICOs) or more modern initial DEX offerings (IDOs), projects can launch on DEX, promoting their new assets directly to the broader cryptocurrency community and potential investors [108]. During IDO events, users can purchase newly issued tokens, often at discounted prices or by providing liquidity to support trading pairs of new tokens. This approach not only lowers entry barriers into the market but also enables projects to quickly gain market attention and financial support from DEX’s extensive user base.

Furthermore, token issuance extends to the realm of non-fungible tokens (NFTs), where many artists and creators tokenize and sell their works on DEX. For instance, platforms like NBA Top Shot use blockchain technology to issue NFTs representing memorable basketball moments, and some DEXs provide marketplaces for trading these unique digital collectibles [109]. The application of DEX in new asset issuance not only drives innovation in cryptocurrencies and digital assets but also provides equal opportunities for projects of various scales, fostering a more diverse and active financial market. As technology evolves and demand for decentralized finance increases, DEX’s role in new asset issuance will become increasingly important, offering global users more investment choices and opportunities.

3.5.3. Data Markets and Consumer Rights

In the realm of data markets and consumer rights, DEX serves as a critical tool for democratizing information and empowering consumers. For instance, the RECIKA project has established an innovative data marketplace where consumers can upload scanned receipts to directly earn tokens commensurate with the value of their data [110]. This model disrupts traditional patterns of data collection and distribution by transferring data control from centralized retailers and data intermediaries to consumers themselves. Consumers not only decide who can access their data but also derive direct economic benefits from its commercialization.

Moreover, this system enables enterprises to access high-quality consumer data at fair market prices, essential for market research, product development, and customer insights. By exchanging tokens for data, businesses can obtain more accurate market information without relying on potentially biased centralized data sources. This transaction model not only enhances transparency in data transactions but also strengthens data security and privacy protection.

DEX-based data markets can also support broader applications such as consumer review systems, personalized recommendation services, and data-driven financial products. All these activities are recorded on the blockchain, ensuring transaction immutability and traceability, thereby enhancing trust between consumers and enterprises. As awareness of data privacy grows and demand for consumer rights protection increases, the application of DEX in data markets is poised to become a crucial component of the future digital economy.

4. Challenges and Future Development

The challenges and future development of digital asset circulation technologies are pivotal in shaping the next phase of the financial landscape. This paper examines these critical issues to provide a comprehensive understanding of the obstacles and opportunities that lie ahead in the realm of digital assets. Section 4.1 discusses the security and flexibility of smart contracts, addressing vulnerabilities and potential improvements to ensure robust and adaptable agreements. Section 4.2 focuses on the efficiency and decentralization of consensus algorithms, exploring the balance between speed, scalability, and maintaining a decentralized network. Section 4.3 delves into the interoperability of cross-chain technologies, crucial for the seamless interaction and transfer of assets across diverse blockchain platforms. Section 4.4 addresses the challenges of balancing privacy protection technologies, ensuring that confidentiality and transparency are maintained in digital asset transactions. Finally, Section 4.5 explores the challenges and future development of decentralized exchanges, examining their role in promoting secure, peer-to-peer trading without intermediaries. Through these sections, we aim to illuminate the critical challenges and potential pathways for the advancement of digital asset circulation technologies in the evolving digital economy.

4.1. Security and Flexibility of Smart Contracts

Smart contracts, as a core component of blockchain technology, demonstrate enormous potential in the realm of digital asset circulation, but they also face a series of challenges and issues [83]. First, readability and code correctness are critical concerns for smart contracts. Since smart contracts are typically written in specific programming languages like Solidity and compiled into bytecode for execution on the blockchain, this results in opacity and readability challenges. Additionally, once deployed, smart contracts are immutable, making it crucial to ensure code correctness before deployment.

Second, efficiency in execution and issues with dynamic control flow are significant factors limiting their development. Smart contract execution is serialized, which restricts system performance, especially when multiple smart contracts need to interact, complicating the prediction of contract behaviors. Furthermore, privacy protection for smart contracts is a pressing issue due to the public nature of all transaction records, potentially leading to sensitive information leaks.

The future development of smart contracts in digital asset circulation hinges on addressing these challenges. On one hand, there is a need to develop more secure and efficient programming languages and tools to reduce programming errors and enhance code readability. For instance, formal verification methods can be used to analyze smart contract security or new programming languages can offer better security guarantees. On the other hand, exploring new consensus algorithms and execution models is essential to improve smart contract execution efficiency, such as enhancing performance through parallel execution of smart contracts.

Simultaneously, the development of privacy protection technologies is crucial for the future of smart contracts, such as employing zero-knowledge proofs or other encryption techniques to safeguard transaction privacy. Moreover, as blockchain technology advances, research into cross-chain interoperability will support smart contracts’ applicability across different blockchain platforms, thereby expanding their scope of applications.

Smart contracts hold vast potential in the field of digital asset circulation, but realizing their full potential requires overcoming existing technical challenges and continually advancing and refining related technologies and tools. Through ongoing technological innovation and research, smart contracts are poised to play a more critical role in the future digital economy.

4.2. Efficiency and Decentralization of Consensus Algorithms

Consensus protocols face numerous challenges in the domain of blockchain-based digital asset circulation, including transaction processing efficiency, cross-shard transaction handling, improvements in BFT protocol performance, and cross-chain interoperability [17].

Firstly, efficient transaction processing is crucial for blockchain scalability. In blockchain systems that allow concurrent block appending, minimizing duplicate or conflicting transactions is a pressing issue. Mechanisms like transaction information allocation, considering distances between miner identities and transaction identities, effectively reduce duplicate transactions among concurrent blocks. Additionally, prioritizing transactions based on identity, whether transaction or miner, also reduces conflicts. When there are no duplicate or conflicting transactions on the blockchain, system throughput significantly increases [21].

Improving the efficiency of cross-shard transaction handling is another critical research direction. In shard-based blockchains, transaction inputs may be distributed across different shards, necessitating cross-shard communication for transaction verification, thereby increasing communication costs. Researchers have proposed various methods to address this issue, including optimizing shard algorithms and improving cross-shard communication mechanisms to reduce communication costs and enhance transaction processing efficiency [111].

Performance enhancement of Byzantine fault tolerance (BFT) protocols based on committees is also a focal point of current research. While such protocols achieve high throughput and low computational costs, their scalability and decentralization are limited by communication costs in large-scale networks. Techniques like cryptographic algorithms such as threshold signatures and collective signatures can reduce communication costs, allowing more nodes to participate in consensus and thereby increasing the decentralization of blockchain networks [20]. Furthermore, extending committee-based BFT protocols to non-permissioned environments through methods like decoupling functions and asynchronous processing can efficiently utilize idle resources, further enhancing performance [112].

Moreover, cross-chain interoperability represents a future trend in digital asset circulation. Through sidechain technologies, different blockchains can securely and efficiently exchange assets while maintaining their respective security isolation. Additionally, heterogeneous architectures like the Beacon chain in Ethereum 2.0 provide interoperability among chains in different shards, coordinating chains across shards to maintain system-wide consistency [84].

4.3. Interoperability of Cross-Chain Technologies

In the digital asset circulation ecosystem, cross-chain technologies have become crucial for facilitating the exchange of digital assets. However, research and practical applications in this field still face a series of challenges, with the performance of cross-chain transactions being the foremost issue. While the decentralized nature of blockchain ensures system transparency and immutability, it also imposes scalability limitations. Solutions such as the blockchain router scheme proposed by Wang et al. [112] and Rocket’s AnLink multi-chain communication protocol [113] attempt to address these challenges, yet performance improvements are constrained by single-machine capabilities. Additionally, validation mechanisms for cross-chain transactions, such as the block header plus SPV model proposed by Shao et al. [114], are critical for ensuring transaction authenticity and validity.

Another challenge lies in adapting and connecting multi-chain protocols. As blockchain technologies diversify, frameworks like the modular approach proposed by Kan et al. [21] and the Interchain framework proposed by Ding et al. [115] explore solutions to enable interoperability between different blockchain systems. These frameworks provide the technical foundation for a multi-chain coexistence ecosystem.

Managing cross-chain transactions and locked asset management are equally critical. Tan et al.’s proposal for cross-chain transaction management emphasizes the need for transaction consistency and atomicity. Moreover, secure and accurate bidirectional pegging mechanisms during digital asset transfers require effective asset-locking mechanisms to mitigate potential risks.

Lastly, synchronization of cross-chain information and security assurance are paramount. Information synchronization necessitates consistent ledger records between chains, while security concerns involve maintaining network security and stability while preserving system independence. Consensus algorithms like DPoS and xBFT proposed by Karame et al., as well as notary and sidechain mechanisms mentioned by Herlihy et al. [12], address these challenges. Cross-chain technologies demonstrate significant potential in blockchain-based digital asset circulation, yet their development must overcome challenges in performance, interoperability, asset management, information synchronization, and security. Future research should focus on enhancing performance and interoperability while ensuring robust asset management and information synchronization mechanisms underpinned by rigorous security measures.

4.4. Balancing Privacy Protection Technologies

The application of privacy protection technologies in the blockchain domain presents a series of challenges, particularly prominent in digital asset circulation. First, while privacy protection technologies such as zero-knowledge proofs (ZKPs), secure multi-party computation (SMPC), homomorphic encryption (HE), commitment schemes, mixing mechanisms, ring signatures, and differential privacy are theoretically mature, they face efficiency and scalability issues in practical deployment [43,116,117]. For instance, ZKPs may slow down transaction speeds due to their high computational complexity when providing proof of transaction validity, thereby impacting user experience.

Secondly, privacy protection technologies must strike a balance between safeguarding user privacy and meeting regulatory requirements. With global data protection regulations such as GDPR in effect, ensuring systems comply with these regulations while protecting user privacy becomes crucial [67,118]. In digital asset circulation, system designers must incorporate regulatory compliance considerations into the design of privacy protection mechanisms to avoid potential legal risks.

Moreover, implementing privacy protection technologies often requires significant expertise and technical capability. In the development of smart contracts and blockchain applications, developers need a deep understanding of cryptography and security protocols to ensure system integrity [47,54]. With the advancement of quantum computing, existing encryption algorithms may face new security threats, necessitating privacy protection technologies that are forward-looking and capable of addressing future security challenges [44,55].

Integrating privacy protection technologies into blockchain also entails addressing interoperability issues. Different blockchain platforms may adopt varying privacy protection schemes, making compatibility and interoperability between these schemes critical to driving the widespread application of digital asset circulation and blockchain technology [42,50].

Lastly, user awareness and acceptance of privacy protection technologies pose obstacles to their adoption. In digital asset circulation, users may be skeptical about the effectiveness of privacy measures or find the complexity of using these technologies cumbersome. Therefore, enhancing user awareness and trust in privacy protection technologies is pivotal to their adoption and proliferation [119,120].

4.5. Challenges and Future Development of Decentralized Exchanges

Despite the rich advantages of transparency, trustless trading environments, and complete user control over assets, decentralized exchanges (DEXs) also face several challenges in regulation, technological performance, user adoption, and reliance on centralized authorities [121].

In terms of regulation, the decentralized nature and peer-to-peer trading model of DEX conflict with anti-money laundering (AML) and combatting financing of terrorism (CFT) requirements. Many DEXs do not enforce know-your-customer (KYC) procedures due to the absence of a central authority, making it difficult for regulatory agencies to track and supervise transactions, thereby increasing the risk of illicit activities [122]. However, integrating KYC and accountability mechanisms into the DEX code can centralize parts of their operations, contradicting the original decentralization ethos.

Technological performance-wise, while DEX offers transparency and security superior to centralized exchanges, their transaction speeds and user experiences still need improvement. Currently, centralized exchanges outperform DEX significantly in transaction speeds, posing a significant challenge for users seeking efficient trading. Additionally, scalability issues in blockchain need urgent resolution to enhance DEX transaction speeds and processing capabilities, catering to more user demands. The adoption of Layer 2 solutions (such as the lightning network, and rollups) can significantly improve transaction speeds and processing capacities [123]. Furthermore, optimizing user interfaces and user experiences can lower barriers to entry, making it easier for ordinary users to understand and operate DEX.

Regarding user adoption, current DEX has seen slow growth in user bases, partly due to their relatively high learning curve which ordinary users may find challenging to understand and operate. Additionally, users and markets may need time to adapt to and trust the regulatory and governance mechanisms of DEX. By providing more educational resources and training courses, helping users understand how to safely use DEX, and offering user support and help centers, user adoption can gradually be enhanced [121].

Dependence on centralized authorities in society is also a challenge. People have long been accustomed to and reliant on centralized institutions to manage assets and data, making the acceptance and adaptation to decentralized solutions a process. Although DEX offer an opportunity through blockchain technology to regain control and choice, it requires deep reflection and reform of existing financial and data management practices by users, society, and regulatory bodies. Increasing user trust in DEX through transparent governance mechanisms and security audits, and encouraging user participation in community governance, can enhance user identification and responsibility towards the platform.

5. Conclusions

This paper offers a comprehensive overview of the technological framework for digital asset circulation based on blockchain, analyzing key components such as consensus algorithms, smart contracts, cross-chain interoperability, privacy protection technologies, and decentralized exchanges (DEXs).

Consensus algorithms are fundamental to blockchain networks, ensuring unified agreement on transaction records to maintain system security and stability. These algorithms are essential for executing smart contracts and securing cross-chain transactions. Privacy protection technologies, including zero-knowledge proofs, homomorphic encryption, and secure multi-party computation, are crucial for safeguarding transaction data and personal privacy and ensuring the confidentiality of sensitive information.

Smart contracts, another cornerstone of blockchain technology, automate the execution of contractual terms through pre-defined code. This automation enhances transaction efficiency and reduces costs, enabling complex transactions without intermediaries and fueling the growth of decentralized finance (DeFi). Decentralized exchanges (DEXs), utilizing smart contracts and liquidity pools, provide peer-to-peer trading platforms that enhance market liquidity and transparency by eliminating traditional intermediaries.

Cross-chain technology addresses the challenge of asset and data exchange across different blockchain networks. Through mechanisms such as cross-chain bridges, hash time-locked contracts (HTLCs), and relay technologies, it achieves seamless interoperability between blockchain ecosystems. This integration facilitates the global circulation of digital assets and opens new opportunities for asset trading and utilization.

In summary, the integration and interaction of these technologies form a robust ecosystem crucial to blockchain-based digital asset circulation. They drive advancements in the blockchain sector and will play an increasingly vital role in shaping the future digital economy and its asset circulation dynamics. By providing a detailed framework and analysis, this paper contributes valuable insights and guidance for future research in the field, addressing the current limitations and proposing directions for further exploration.