Crypto firms aim to build trust within future products and services

The cryptocurrency ecosystem has had a turbulent year in 2022. The collapse of the FTX, Celsius, Three Arrows Capital and Terra ecosystems has sparked criticism both inside and outside the crypto industry.

Many losses have been recorded from these events. Blockchain analytics firm Chainalysis released a report last December, noting that the de-pegging of Terra’s stablecoin, Terra USD Classic (USTC), pushed realized weekly losses to his $20.5 billion. bottom. The findings further show that the subsequent collapses of Three Arrows Capital and Celelsia in June 2022 led to realized weekly losses of $33 billion.

While these events may have resulted in a loss of trust within the crypto ecosystem, it is important to point out that blockchain technology and cryptocurrencies have not failed. Dan Morehead, chief operating officer of Pantera Capital, an American hedge fund that specializes in cryptocurrencies, said in a December 19, 2022 letter to investors:

“The narrative that blockchain skeptics and some regulators and politicians are running about misses the point. The collapse of FTX had nothing to do with blockchain technology. is not crypto, Bitcoin and all other protocols worked perfectly.”

Morehead notes that despite recent events, companies within the cryptocurrency and blockchain sector continue to build and release products. In fact, more projects than ever are focused on instilling trust in their products.

Companies aim to secure trust

Paul Brody, EY Global Blockchain Leader and Enterprise Ethereum Alliance board member, told Cointelegraph that the value of rules and regulations and the rule of law have a role to play within the cryptocurrency sector. He said he feels a new respect for the idea that “‘The code is the law’ doesn’t seem to come up much in discussions anymore,” he said.

Given this, Brody believes auditors, regulators, and mathematical proofs will play a key role in building trust with transparency within the crypto sector.

“I think we can look forward to a future where not only is the code publicly available, but companies publicly appoint external auditors and welcome regulatory inspections. I think we have a role.”

Brody points out that many cryptocurrency companies are starting to focus on auditing and data reporting. For example, Jordan Kruger, co-founder of Vesper Finance and head of decentralized finance (DeFi) at Web3 infrastructure her layer Bloq, told Cointelegraph that since its launch in 2021, her company has seen many said it was being audited by

“We have over 50 independent audits across multiple smart contracts that make up our pools and strategies,” she said.

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Kruger noted that while this is important for Vesper users, regular audits should be seen as a contribution to the overall DeFi ecosystem. “Our focus on software quality means that when other DeFi protocols are integrated with us, we can partially draft Vesper’s significant investment in audits. This is an important point, as DeFi protocols have witnessed some of the biggest hacks and frauds in 2022. Regular smart contract audits may have prevented some of these from happening.

In addition to the audits performed on DeFi protocols, the non-fungible token (NFT) sector has started conducting audits, especially with respect to phygital products or physically backed NFTs. For example, Jake Spinowitz, community head of Courtyard, an NFT marketplace that allows collectors to trade and store their physical collectibles, told Cointelegraph that Courtyard is committed to ensuring trust and transparency of stored items. It said it was arranging for a third-party audit.

Additionally, Spinowitz explained that Courtyard is working with security provider Brinks to protect physical assets tied to digital twins. “If you are tasked with protecting someone’s valuable physical possessions, ideally you should have a demonstrated ability to safely store, handle, and transport those assets (further reducing risk To do so, all physical collectibles we store are insured at market value),” he said.

A combination of audits, along with the use of traditional security agencies, can serve as a successful model for phygital projects moving forward. This could certainly help, as many phygital platforms have expressed concerns about the redemption and storage process for physical NFT assets.

While auditing and data reporting may become the norm within the cryptocurrency ecosystem, protecting user data will also be important. Sandy Carter, senior vice president and channel chief at Web3 domain provider Unstoppable Domains, told Cointelegraph that her company gives domain owners control over the information they share.

“For example, the login feature allows you to share your off-chain profile data to earn rewards from your favorite DApps or have your domain appear on leaderboards. The data you share is fully opt-in.” ‘” she explained. “All domains are automatically created on the blockchain, as opposed to Unstoppable’s database,” she said.

Chris Castig, co-founder of Console.xyz, a Web3 chat platform, told Cointelegraph that Web3’s trust-focused principles should reflect the impact that one person, group, or organization has on an app’s users. He said it should be kept to a minimum. So, he explained, platforms like consoles can put a user’s social graph, including followers, networks, etc., on the blockchain. He elaborated:

“We use smart contract and NFT integrations to ensure that the social graph exists outside the app and on the blockchain. Easy to find, you own your community, not us.”

Castig further said that his company uses Ethereum Name Services (ENS) for identities, not usernames. “You can use ENS names (.eth) or equivalent distributed identities (.btc, .tez, etc.) to replace usernames and passwords for sites,” he said. An additional layer of user privacy and trust is then achieved.

“On social sites where I interact with other people, I can use a consistent username across sites, which conveys trust to other users. It also means that you own your identity, not the person behind it,” Casting said.

Will the ideal of cryptocurrencies be maintained with the additional trust built-in?

Regular audits, data reporting and transparent privacy measures could become the norm for many crypto projects moving forward, but some wonder if this will affect the trustless nature of cryptocurrencies. There may be others.

While this is a valid concern, Brody explained that the trustless nature of cryptocurrencies is no longer feasible. “It was somewhat achievable in the early days of pure crypto, where you could self-manage and everything you needed to know was on the chain. The moment we moved to , it became impossible,” he said.

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Brody added that the cryptocurrency ecosystem should aim for decentralized and regulated cryptocurrencies rather than “trustless” cryptocurrencies and blockchains. Brody believes that all the benefits promised by cryptocurrencies are achievable if implemented correctly. He said:

“Decentralization means there is no single firm that can be the gatekeeper or monopoly. It means you can decide if it’s worth it.”