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How Increasing Trust Could Provide a Further Boost to DeFi

How Increasing Trust Could Provide a Further Boost to DeFi

Many experts in crypto have made many predictions over the years, but a lot of them haven’t come true. Security token offerings failed to be the big trend of 2019, and the revolutionary potential of enterprise blockchain hasn’t yet materialized. 

Nevertheless, the crystal ball gets it right sometimes. Last December, DeFi was one of the predicted trends of 2020, and so far, it’s been the undeniable smash hit of the year. From Compound to Uniswap to yEearn - the innovators continue to make the headlines. 

Despite all the developments in DeFi, it does continue to operate with several critical limitations. Due to its unregulated status, there are few formalities for borrowers. This situation is often touted as a plus - after all, it follows the spirit of open finance and means anyone, even those without a government-issued ID, can get a DeFi loan. 

It does come with some drawbacks, though. Because nobody knows who is on the other end of a loan transaction, and given the notorious volatility of cryptocurrency, loans must be heavily overcollateralized. The requirement to put down more than you’re borrowing limits the value of DeFi in terms of one of its big areas of promise - to bank the unbanked. 

What’s missing in this equation is trust. Imagine if a borrower could demonstrate their creditworthiness somehow, without needing to put down more funds than they’re actually borrowing. The DeFi system would potentially offer far more value to the unbanked than it can today. 

Introducing UTU Protocol

The trust gap is exactly the problem that UTU Protocol aims to overcome, and it has significant implications for the burgeoning DeFi segment. UTU operates a blockchain-based trust protocol. If someone applies for a loan, the bank uses a credit-scoring system to assess whether or not they’re creditworthy, and often, how much they can borrow. UTU can replicate the advantages of this kind of system, but using its innovative token-based trust platform. 

Using UTU Protocol, a lender could award the UTU utility token to a borrower to certify that they’ve been reliable in repaying their loan. Based on the accrual of UTU tokens over time, lenders could then opt to accept an increased level of risk, reducing the collateral requirements. UTU tokens are non-transferable so that nobody can buy their way into the trust system. Rather than a nondescript numerical scoring system, UTU takes a descriptive narrative from users to provide more relevant and meaningful information. 

In DeFi, trust works both ways. Developers bootstrap many DeFi dApps, and the code is brand-new, untested, or even copied. This year alone, there have been several high-profile examples of buggy code leading to hacks and drained funds, including lending protocol bZX and the sudden rise and fall of YAM Finance. Therefore, any borrower staking collateral on a DeFi platform agrees to accept a certain level of risk. 

A trust protocol like UTU can thus work both ways. Developers can award UTU tokens to smart contract auditing firms, based on the robustness of their checks. Users can provide an endorsement of UTU tokens to platforms where they’ve successfully concluded transactions without incident. Over time, DeFi dApps and their service providers can gain reputation ratings that forewarn users whether or not they’re taking a risk by staking their crypto. 

An Internet-Wide Reputation System?  

While UTU Protocol has significant utility in replacing the law of code with human trust in the nascent DeFi sector, the platform was conceived with broader use cases in mind. 

The project founders had identified an issue inherent with web-based reputation scoring systems - that they’re easily bought and sold. Amazon, in particular, has come under fire for the existence of subreddits and Facebook groups dedicated to helping vendors connect with those willing to leave a review for products they’ve never used. 

Therefore, a blockchain-based reputation system, bounded by system parameters that make it impossible to gamify, could add real value to several sectors where reputation is key to gaining users. 

UTU is on a roadmap to full launch, with the MVP for a DeFi-focused trust portal in scope for this year. However, in 2021 and beyond, the project plans to roll out support for more sectors.

The word “trustless” is used so frequently in relation to cryptocurrency that it’s easy to forget the fact that trust is inherent to any interaction - even blockchain-based peer-to-peer transactions. The lack of available trust mechanisms is currently proving to be a limitation on the global reach of DeFi. However, with a reliable basis for establishing relationships between lenders, borrowers, and platforms, DeFi could eventually fulfill the noble vision of providing a financial stepping stone to the world’s unbanked population

© 2020 CryptoDaily All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

 

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Ampleforth Launches on TRON and Two Other New Blockchains

Ampleforth Launches on TRON and Two Other New Blockchains

Ampleforth (AMPL), the algorithmically stabilized smart money protocol, is now launching on three new blockchains: TRON, Acala (Polkadot), and NEAR.

According to the announcement, the move is part of Ampleforth’s plans to provide a core monetary asset to users on multiple blockchains, helping to support the rapidly developing decentralized finance (DeFi) ecosystem on these chains. 

What is AMPL?

Simply put, Ampleforth is an alternative to stablecoins as a blockchain-based store of value and stabilized unit of purchasing power. Unlike these assets which are usually backed by fiat currencies such as the US dollar (USD) or euro (EUR) to maintain a stable value, the value of AMPL is instead entirely set by supply and demand.

This is achieved with a novel solution: changing the amount of AMPL in circulation to meet demand. When demand for AMPL increases, so too does the supply, when demand decreases, so too does the supply — this process is known as a rebase. This essentially means the amount of AMPL a user holds in their wallet expands or contracts based on changes in the total supply. 

To put this into perspective, if you were holding 1,000 AMPL one day, the next day you might be holding 1,100 AMPL if there is a 10% positive rebase. Likewise, you could be holding 900 AMPL if there is a 10% negative rebase. This process is non-dilutive, which essentially means you will always maintain the same proportion of the entire supply. If you owned 1% of all AMPL before a rebase, you will still own 1% of all AMPL after. 

The system is designed to provide a new type of “base money” that is uncorrelated with traditional markets, including fiat and cryptocurrency markets — instead, having its value and circulating supply set based on the demands of its users. This represents a new building block for DeFi, since AMPL can be used as an uncorrelated asset, debt instrument, collateral, and much more without any ties that go back to fiat money. 

Why TRON?

Although the Ampleforth protocol was launched on three new blockchains: Acala, NEAR, and TRON, the latter of these is arguably the most prominent. 

 

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In the second half of 2020, TRON has massively expanded its DeFi ecosystem and is now the second most popular blockchain for DeFi applications after Ethereum. Unlike Acala and NEAR, which are still somewhat in their nascent stages of ecosystem development, TRON already has many of the most important DeFi building blocks in place. 

It already has a TRC20 decentralized automatic market maker protocol (AMM) in JustSwap, liquidity mining platforms like SUN and DMDT, and its own DeFi lending and borrowing protocol with Zethyr Finance. As a result, it is most poised to benefit from the uncorrelated adaptive money. 

“Tron’s ecosystem is obsessed with cutting-edge DeFi assets and capabilities, which is why everyone is so excited about AMPL,” said Justin Sun, founder of TRON, CEO of BitTorrent in the announcement. “We expect deep liquidity pools to form early on in order to support widespread use for trading and collateral as soon as possible.”

 

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Brad Garlinghouse notes now much of an impact Fiat inflation has had on the world of crypto in 2020

Brad Garlinghouse notes now much of an impact Fiat inflation has had on the world of crypto in 2020

Quick take

1 minute read

  • Many people have predicted that in 2021, the world of cryptocurrency will spike to highs not seen before.
  • Brad Garlinghouse has recently said that next year will see a plethora of adoption when it comes to the growth of digital assets and the overall industry as people look to diversify their portfolios.

Many people have predicted that in 2021, the world of cryptocurrency will spike to highs not seen before.

To that end, the chief executive officer of the San Francisco-based blockchain company Ripple, Brad Garlinghouse has recently said that next year will see a plethora of new adoption when it comes to the growth of digital assets and the overall industry as people look to diversify their portfolios.

He said:

“Looking forward to 2021 as more companies hold crypto on their balance sheets (diversification is key here).”

Brad made his comments during an interview with Julia Chatterley of CNN earlier this week as he went on to say that this year has been particularly exciting for the industry. Numerous gains have been experienced over the course of 2020 and it doesn’t seem that it is slowing down.

As many of us are well aware, coronavirus has been a big part as to why digital payments have become more popular. Many people are using digital currencies as a form of payment, investment and as a store of value. Big institutional investors such as PayPal is one company that has been getting further involvement within the industry.

On this topic, the CEO noted that numerous governments from all over the world have played a big part in boosting the performance and adoption of several cryptos over the course of this year.

“Many governments around the world are printing more fiat currencies. Here in the United States, you see trillions of dollars in stimulus and that means we’re inflating the US dollar.”

Over the course of 2020, the world of cryptocurrency has grown massively with many people predicting that this growth is only going to increase in the coming year. The CEO went on to discuss the long-term value of my crypto assets. He specifically mentioned the store of value and the utility as he highlighted:

“The long-term value of any digital asset is going to be derived from its utility.  One utility is a store of value and you’re seeing that across Bitcoin and other cryptocurrencies that don’t have an inflationary dynamic.”

For more news on this and other crypto updates, keep it with CryptoDaily!

© 2020 CryptoDaily All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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FinHub arm of The SEC set to become an independent office

FinHub arm of The SEC set to become an independent office

Quick take

1 minute read

  • In an announcement, the securities and exchange commission and their financial technology team will soon become an independent office. 
  • Launched two years ago, the strategic hub for innovation and financial technology from the SEC has been the forefront of securities regulation.

In an announcement that was revealed earlier this week on the 3rd of December, the United States securities and exchange commission and their financial technology team will soon become an independent office. Launched two years ago in 2018, the strategic hub for innovation and financial technology (otherwise known as FinHub) from the SEC has been the forefront of securities regulation.

This sidearm for the SEC has been clearly quite busy the past few years as it goes after numerous initial coin offerings and other related things to the crypto industry.

Valerie Szczepanik, the leader of the hub for innovation will now be reporting directly to the chairman of the commission. For now, that is Jay Clayton who is set to stand down from his position next year but speaking on the matter, he said:

"The SEC is committed to innovation in our markets, consistent with our time-tested regulatory framework. Our action to establish FinHub as standalone office furthers our commitment to facilitate the introduction of new technologies for the benefit of investors and the efficiency and resiliency of our markets. The agency is fortunate to benefit from Val's expertise and deep knowledge in the areas of innovation, financial technology and investor protection, and I’m pleased she will continue to lead FinHub as its first director."

Director of the Division of Corporation Finance, Bill Hinman said:

"Not surprisingly, FinHub has thrived under Valerie's leadership. This move to enhance FinHub's role in leading and coordinating policy across all SEC Divisions and Offices will benefit market innovators and strengthen investor protection."

For more news on this and other crypto updates, keep it with CryptoDaily!

© 2020 CryptoDaily All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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Willy Woo: $200,000 for BTC next year is “Conservative“

Willy Woo: $200,000 for BTC next year is “Conservative“

Quick take

1 minute read

  • Well-known analyst and crypto commentator, Willy Woo has recently given some bullish predictions on the leading crypto coin.
  • Many people are very excited as bitcoin hitting $300,000 by the end of next year is “not out of the question“.

Well-known analyst and crypto commentator, Willy Woo has recently given some bullish predictions on the leading crypto coin.

Many people are very excited for the leading cryptocurrency to reach $20,000 before the end of this year but that could be seen as just a dent in the grand scheme of things as bitcoin hitting $300,000 by the end of next year is “not out of the question“ according to the expert.

Over the course of 2020, bitcoin has been appreciating in value by more than 175%. In March, the coin was priced somewhere in the $3000 range but now, we are looking at $18,000/$19,000 at the least.

But the analyst believes that it still has more room for further gains for the coin. 

The price point of $200,000 is seen as “Conservative“ to the analyst.

The analyst has been well known to be bullish over the past few weeks. He has even predicted that XRP, the token from the San Francisco company ripple, will have an exciting year despite having a lacklustre one in 2020.

For more news on this and other crypto updates, keep it with CryptoDaily!

© 2020 CryptoDaily All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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