Bitcoin cannot be regulated because it is software and there is no legal entity behind it

Profile picture of Ishan Pandey Hacker Noon

Ishan pandey

Crypto veteran. Tokenization, DeFi and Security Tokens – Blockchain.

Ishan Pandey: Hi Denko, welcome to our “Behind the Startup” series. Tell us about yourself and the history of Reef?

Denko mancheki: Hi Ishan, thank you for hosting me and I am delighted to share the story and vision behind Reef. I am the CEO and co-founder of Reef and before starting the company I worked at Viewly and Adelphoi as CTO. Speaking of Reef, Reef is a reliable, scalable, efficient and fast blockchain built on a substrate to make DeFi, NFT, and games easy to use for newcomers. Initially, it was a global cash aggregator, smart yield farming aggregator and smart asset management platform designed to make it easy for newbies to get started in farming. yield.

Now, Reef Chain is the most advanced Ethereum VM compatible blockchain. It is self-evolving and has chain governance. Its infrastructure also enables EVM extensions that enable native token bridges, scheduled calls (i.e. recurring payments), and in-place smart contract code upgrades. It will support an additional VM in the near future, which will allow developers to write code in multiple programming languages. The network operates on a nominated Proof-of-Stake (NPoS) consensus mechanism, offering scalability and low fees.

Ishan Pandey: Decentralized finance is state of the art and a bit of a mystery to outsiders. The Bank for International Settlements recently formed a committee to analyze the exposure of cryptoassets to banks. Do you think DeFi protocol hacks could have a huge impact on the real economy in the future?

Denko mancheki: This is an excellent question. For DeFi startups, cybersecurity is the key to survival as cyber attacks are rampant. Protocol DeFi Cream Finance lost $ 130 million and DeFi lender bZx suffered a $ 55 million hack. Imagine a DeFi protocol managed by global institutions with a total locked-in value of $ 30 billion – imagine if such a protocol is hacked. This will certainly have an impact on the real economy. DeFi is the future, but we’re not even just getting started when we look at the big picture. DeFi protocols will invade traditional financial markets and be exciting, and cybersecurity will be one of the main aspects of success.

Ishan Pandey: Although the crypto markets are growing dramatically exponentially, issues of privacy and interoperability continue to persist. What do you think of governance tokens and the regulation of DeFi protocols?

Denko mancheki: Governance tokens are essential for DeFi protocols because they make the protocol decentralized and allow the community to manage the project. According to regulators, a software protocol is not security if it is completely decentralized with no legal entity linked behind it. Therefore, governance tokens will be the bread and butter to ensure decentralization and decentralized governance.

Bitcoin cannot be regulated because it is software and there is no legal entity behind it.

Regulating DeFi is hard work, but regulators come after DeFi. The FATF, in its recent update on the FATF recommendations on VASP, mentioned that DeFi protocols may fall under the definition of VASP, if the software and legal entity are commercially related. Therefore, it will be necessary for DeFi protocols to create a framework in which the fees generated by the protocol do not benefit the legal entity behind it. Additionally, it is important to note that regulators regulate software and regulate the legal entities that underpin it.

Ishan Pandey: The idea of ​​decentralized finance is now recognized as a crucial change in the functioning of financial markets. In what ways has DeFi affected the traditional financial market and how do you think banks can benefit from smart contracts?

Denko mancheki: Banking institutions are 10 years behind and it will be very risky for banks to take advantage of smart contracts now. Smart contracts are still in their infancy and a lot of development and testing is needed before traditional banks and institutions start to apply smart contracts. Additionally, if the bank starts experimenting with smart contracts, they will be tested in a sandbox environment.

Ishan Pandey: Numerous decentralized finance (DeFi) protocols running on Binance Smart Chain (BSC) have been hacked in recent months as the industry continues to project significant growth in 2021. How can we combat these DeFi exploits? Additionally, what are the best cybersecurity practices regarding smart contracts?

Denko mancheki: There is no way to combat DeFi exploits except to have a good cybersecurity framework. It is essential to test smart contracts in the production environment and write robust tests that mimic any circumstances that may occur after the smart contract is released. It is important to note that smart contracts can contain bugs and that complex smart contracts are very susceptible to cyber threats; therefore, it is essential to test smart contracts without being in a rush or feeling that you are in a race to release your smart contract without enough testing. We also have plenty of exploits and postmortem reports to learn, so we need to learn those lessons and prevent the same vulnerabilities from existing in the next DeFi product.

Ishan Pandey: Do you think DeFi protocols are susceptible to money laundering activities? Additionally, how can KYC and other controls be implemented in a decentralized protocol?

Denko mancheki: DeFi protocols are susceptible to money laundering if KYC / AML controls are not in place. This is the reason why regulators are increasing their oversight on DeFi and cryptocurrencies. DeFi protocols must have safety cushions so that the protocols are not a safe haven for the transfer of illicit funds.

Ishan Pandey: What do you think has been the global influence of the pandemic on global finance? Additionally, how can blockchain and DeFi disrupt the global financial market?

Denko mancheki: The pandemic has really increased the adoption of e-commerce and cryptocurrencies as the majority of people have stayed at home. Even as the economic and human costs of the Covid-19 pandemic have become clear, the global financial system has been both a source of strength – with banks and fintechs helping deliver aid to small businesses and households in need – and potential risk – with a record measure of market volatility and growing concern about credit losses. Governments, central banks, regulators, and international organizations have all reacted swiftly to deal with the economic collapse and financial consequences, but there are still debates over how policy should evolve in the future to maintain stability. financial stability.

Blockchain technologies are perfect for managing multi-party, inter-organizational and cross-border transactions, as they are ideally suited for validating, securing and exchanging data. Thousands of proofs of concept have been conducted around the world over the past five years, but actual deployments have been slow to materialize as parties adopting blockchain as a shared ledger must agree on the rights of intellectual property, governance and business models. Government laws have also hampered its widespread use.

The Covid-19 epidemic was necessary to overcome barriers to blockchain acceptance. The virus has exposed flaws in our supply chains, our inability to deploy resources where they are needed most to fight the pandemic, and challenges in collecting and disseminating the data needed to make quick choices. To address these issues, blockchain technologies that have been in development for years have been reused and released.

The post-pandemic era will only accelerate the adoption of blockchain and DeFi.

Warning: The purpose of this article is to remove the information asymmetry that exists in our digital markets today by doing due diligence, asking the right questions, and giving readers better opinions to make informed decisions.

The material does not constitute an investment, financial or legal advice. Please do your research before investing in any digital assets or tokens etc. The writer has no vested interest in the business.

Keywords

Source link

About George H. McWhorter

Check Also

Debugging Software Market Size, Scope, Forecast to 2029

New Jersey, United States, – The latest report published by Verified Market Reports shows that …