{"id":126901,"date":"2020-12-05T12:32:00","date_gmt":"2020-12-05T09:32:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/its-time-to-mature-we-need-compliant-decentralized-finance\/"},"modified":"2020-12-05T12:32:00","modified_gmt":"2020-12-05T09:32:00","slug":"its-time-to-mature-we-need-compliant-decentralized-finance","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/its-time-to-mature-we-need-compliant-decentralized-finance\/","title":{"rendered":"# It\u2019s time to mature: We need compliant decentralized finance"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3d8f7ee3c1d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3d8f7ee3c1d\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/its-time-to-mature-we-need-compliant-decentralized-finance\/#What_would_a_compliant_DeFi_look_like\" >What would a compliant DeFi look like?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/its-time-to-mature-we-need-compliant-decentralized-finance\/#The_right_to_choose_is_the_right_way\" >The right to choose is the right way<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># It\u2019s time to mature: We need compliant decentralized finance <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjAtMTIvZTFmNzhjODMtNjExYy00ODM2LTgyNWYtZDlmM2UyYzc0ZGIyLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-5a136f3a>The crypto space is an incredible, albeit risky, learning environment. Its volatility serves as a dire warning to those who like to test how deep the pool is by jumping in headfirst. Old guards constantly warn newcomers: \u201cTake it slow, learn the basics and stack sats.\u201d Wealth, in this space, can <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ear and disappear in an instant.<\/p>\n<p>In 2018, many newcomers got their first taste of what a crypto winter feels like. This <a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/www.exodus.io\/blog\/bitcoin-crash-history\/\">wasn\u2019t<\/a> the first time Bitcoin (BTC) crashed, and it won\u2019t be the last.<\/p>\n<p>Despite being around for more than 10 years, the crypto space is still in its infancy; the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> advances so quickly that every year we get to experiment with new concepts, new ideas, new applications and new ways to change the face of the world.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Financial literacy will make the digital asset industry sustainable for the future<\/em><\/strong><\/p>\n<p><strong><em><\/em><\/strong>We also run into challenges as bad actors find new ways to scam people out of their hard-earned money, and with new untested projects that capture value but are highly vulnerable to failures, bugs and exploits. Decentralized finance falls within these new experiments; it holds the promise of exciting new ways of doing finance and investments, often with disastrous consequences.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>The chance for DeFi to fulfill the technology\u2019s promise<\/em><\/strong><\/p>\n<p>As more and more traditional organizations take to crypto \u2014 like Square and PayPal \u2014 the opportunity to rise to the challenge is ours; it\u2019s up to those who know the space, who understand its core values and want to see it become much more than a well-kept secret. This is a call to action.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Will PayPal\u2019s crypto integration bring crypto to the masses? Experts answer<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_would_a_compliant_DeFi_look_like\"><\/span>What would a compliant DeFi look like?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Let\u2019s start with defining \u201ccompliance.\u201d It doesn\u2019t just mean that the project follows Anti-Money Laundering regulations but also that it is up to quality and trust standards. This means that DeFi projects should step up in terms of security, quality, user responsiveness and regulatory compliance. Simply put, DeFi projects should guarantee resilience.<\/p>\n<p>Let me be clear: This is not an argument for allocating blame and liability for losses \u2014 these are, after all, decentralized projects, not financial institutions \u2014 but there are billions of dollars <a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/defipulse.com\/\">stacked<\/a> on DeFi projects, and this should account for something.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Institutionalize crypto markets now: There must be compliance controls<\/em><\/strong><\/p>\n<p><strong><em><\/em><\/strong>Our goal should be to increase the number of users \u2014 i.e., encourage mass adoption \u2014 and attract traditional markets and nontechnical investors. We should aim at bringing blockchain and the benefits of DeFi to society. In times where governments are floating bonds with negative interest rates and turning on the money-printing machine, people need better solutions to keep their wealth. Better yet, people should be able to grow financially, regardless of the central bank that governs a specific currency or determines monetary policy.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Corporate disclosure is the only way to get crypto institutionalized<\/em><\/strong><\/p>\n<p>So, what measures could DeFi projects, and the overall space, adopt to become more competitive and attractive to a wider client base? Let\u2019s start with the basics:<\/p>\n<p><strong>Whitelisted addresses.<\/strong> A list of items\/IP addresses that once they receive an initial validation are granted access to a certain system or protocol. In the case of DeFi, we could have one or two trusted anchors that could validate an address and conduct Know Your Customer diligence on the user. Once the user has been validated, all other projects within the same trust channel \u2014 i.e., a group of virtual asset service providers, or VASPs, that have agreed to follow the same set of rules and to collaborate within a well-delineated platform \u2014 can give that user access to products and services without having to redo the entire KYC process.\u00a0<\/p>\n<p>The advantage here is twofold: The user only shows private documents to one or two entities, thus reducing the surface area of attack for any potential data hacks, and the VASPs can have access to a larger user pool without having to increase compliance costs. A system like this could also enable individuals and entities who are excluded from traditional banking, savings and trading ecosystems due to geopolitical reasons to invest in yield-bearing products, alternatives to lending and high-interest accounts. DeFi is an alternative for these citizens and business owners to save, earn and transact.<\/p>\n<p><strong>AML- and GDPR-compliant systems.<\/strong> Institutional capital markets are strictly regulated and supervised by local and international regulatory bodies; the goal is to prevent money laundering and the financing of terrorist operations. With an attestation framework, projects can verify and comply with existing AML regulatory requirements and attract institutional capital while protecting users\u2019 privacy by not requiring them to create copies of their personally identifiable information.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>GDPR and blockchain: Is the new EU data protection regulation a threat or an incentive?<\/em><\/strong><\/p>\n<p><strong>Audited codebases and third-party certifications.<\/strong> There are plenty of blockchain projects out there that are not built under minimum acceptable standards, and it\u2019s difficult for every user to go through the codebase and verify that the code is doing what it is meant to do. By having third-party validators go through the code \u2014 attesting to its integrity, functionality and reliability \u2014 the bar would be raised, making these projects more competitive and safer for investors.<\/p>\n<p><strong>Insurance.<\/strong> This is a relatively new area in blockchain, but there are projects that are tackling risk management through decentralized insurance. Insured projects can capture a wider audience that is willing to take on more market risk and less security risk.<\/p>\n<p><strong>Limits and safety margins.<\/strong> By building guardrails and layered security measures, users are given the option of increasing, or decreasing, their risk tolerance threshold. It also allows projects to limit their losses should a negative event impact them \u2014 for example, investment and withdrawal limits.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_right_to_choose_is_the_right_way\"><\/span>The right to choose is the right way<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>I strongly believe that individuals should be free to choose whether to risk their wealth on untested projects, on volatile investments and on bleeding-edge technologies; we shouldn\u2019t have to rely on governments to tell us where, how much and when to invest. It\u2019s ridiculous that an individual can spend thousands of dollars on lottery tickets but is not allowed to invest the same amount of money in venture capital projects without having to jump massive regulatory or bureaucratic hurdles.<\/p>\n<p>This is why optionality becomes so important: It allows project builders to do what they do best and users to become the key driver in project evolution. The less credible a project is \u2014 especially in comparison with, for example, compliant, audited projects \u2014 the less capital and user base will flow toward it. These are market forces that should be allowed to move freely.<\/p>\n<p>It\u2019s important to also be clear that competition, in our space, is done on various levels; some require collaboration, some don\u2019t. The overall objective is not to build the project that wins the short-term war but to build an industry that changes the lives of everyone, for the better, along with the way we do finance and wealth management \u2014 the way these are accessed by everyone, without unnecessary third parties or unbridled knee-jerk regulation. This is an infinite <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/game\/\" data-internallinksmanager029f6b8e52c=\"7\" title=\"Game\" target=\"_blank\" rel=\"noopener\">game<\/a>.<\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Juan Aja Aguinaco<\/strong> is an entrepreneur, startup consultant and co-founder of Shyft Network Inc. Previously, Juan was the chief operating officer of Decentral, one of Canada\u2019s most influential blockchain innovation hubs. Before moving to Canada, he served as vice president and legal counsel for an oil and gas company based in Mexico City. Juan holds a Bachelor of Laws from Universidad Iberoamericana and an MBA from the Schulich School of Business.<\/div>\n<\/div>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener noreferrer\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/it-s-time-to-mature-we-need-compliant-decentralized-finance\" target=\"_blank\" rel=\"noopener noreferrer\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# It\u2019s time to mature: We need compliant decentralized finance &#8221; The crypto space is an incredible, albeit risky, learning environment. Its volatility serves as a dire warning to those who like to test how deep the pool is by jumping in headfirst. Old guards constantly warn newcomers: \u201cTake it slow, learn the basics and&#8230;<\/p>\n","protected":false},"author":1,"featured_media":126902,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.cointelegraph.com\/uploads\/2020-12\/e1f78c83-611c-4836-825f-d9f3e2c74db2.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74859,74894,74863,74868,75141,117,70934,4965],"class_list":["post-126901","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-aml","tag-blockchain","tag-cryptocurrencies","tag-defi","tag-kyc","tag-business","tag-regulation","tag-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/126901","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=126901"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/126901\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/126902"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=126901"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=126901"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=126901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}