Tag Archives: decentralized

Session 7: Blockchain Application for Smart Contract and Decentralized Applications by Anndy Lian

Session 7: Blockchain Application for Smart Contract and Decentralized Applications by Anndy Lian

The digital age has ushered in an era of unprecedented technological advancement, and with it, a wave of innovation is sweeping across all sectors, including the often-complex realm of governance. At the forefront of this transformation lies the convergence of cryptocurrency, decentralized applications (dApps), and e-governance, a powerful synergy poised to redefine the relationship between governments and citizens. Anndy Lian, an intergovernmental blockchain expert, shares his views at a training program co-hosted by The Asian Productivity Organization (APO) and the National Productivity Centre (NPCC) of MISTI of Cambodia.

At its core, this transformation is fueled by the principles of decentralization, transparency, and efficiency – values deeply embedded within the architecture of blockchain technology. Unlike traditional centralized systems, where power and control reside in the hands of a few, blockchain operates as a distributed ledger, accessible to all participants. This inherent transparency fosters a new level of accountability, as every transaction, every decision, is recorded immutably and can be publicly verified. For governments grappling with issues of corruption and mistrust, blockchain emerges as a powerful tool to restore faith and ensure ethical conduct.

Beyond transparency, blockchain empowers the creation of automated, efficient systems through the use of smart contracts. These self-executing agreements, encoded on the blockchain, have the potential to revolutionize public services, eliminating bureaucratic bottlenecks and reducing the risk of human error. Imagine a world where applying for permits, receiving government benefits, or registering property is as simple as clicking a button – a world where citizens are no longer bogged down by paperwork and lengthy processing times. Smart contracts can make this vision a reality, streamlining government operations and freeing up resources for more critical tasks.

The burgeoning world of Decentralized Finance (DeFi) offers a compelling glimpse into the transformative potential of these technologies for e-governance. Platforms like PancakeSwap and Aave, built on blockchain networks, have gained immense popularity for their ability to facilitate financial transactions with minimal fees and user-friendly interfaces. These platforms demonstrate how governments could leverage similar principles to create more inclusive and efficient systems for distributing aid, managing public funds, and incentivizing citizen participation in governance initiatives.

One of the key barriers to widespread adoption of these technologies, however, is the perceived complexity of blockchain and cryptocurrency. Many view these as highly technical domains, accessible only to programmers and tech-savvy individuals. However, this perception is rapidly changing with the emergence of user-friendly tools like ChatGPT, which can assist even non-programmers in writing and testing smart contracts. These tools are democratizing access to blockchain technology, empowering individuals and organizations to explore its potential without requiring extensive technical expertise.

While the opportunities are vast, it is crucial to acknowledge the challenges that come with integrating these nascent technologies into existing governance structures. Establishing clear regulatory frameworks for cryptocurrencies, addressing concerns related to security and volatility, and building the necessary technological infrastructure will require careful consideration and collaboration between governments, technologists, and citizens.

Despite these challenges, the potential rewards are too significant to ignore. The convergence of cryptocurrency, dApps, and e-governance represents a paradigm shift in how we think about governance in the digital age. By embracing the principles of decentralization, transparency, and efficiency, governments can harness the power of these technologies to create more responsive, accountable, and citizen-centric societies. The journey may be complex, but the destination – a future where technology empowers and strengthens the very fabric of our democracies – is one worth striving for.

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
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Top 5 Decentralized Finance Trends to Expect in 2024: Analyst Insights

Top 5 Decentralized Finance Trends to Expect in 2024: Analyst Insights

The decentralized finance (DeFi) space is leaving the bear winter behind and entering a bull summer as industry interest continues to pick up and the market moves into incentive-driven growth that focuses on real utility and technological innovations.

Or at least, that is what experts in the DeFi space are saying.

A recent report published by Exponential found that the “latest indicators signal not just growth but a transformative shift” within the DeFi space with significant growth in interest in DeFi yields.

The total value locked (TVL) in yield-generating DeFi protocols has steadily increased from $26.5 billion in the third quarter of 2023 to $59.7 billion in the first quarter of 2024, according to the report.

Total Value Locked per Protocol Job.
Total Value Locked per Protocol Job. Source: Exponential.fi

This growth signifies a return of confidence and liquidity to the DeFi markets.

We spoke to experts to find out the latest DeFi trends for 2024.

Key Takeaways

  • The DeFi industry continues to evolve with $43 billion already locked in low-risk yield contracts, indicating a shift towards more stable and reliable investment avenues.
  • The merging of traditional financial systems with DeFi is a significant trend, with financial institutions expected to use DeFi innovations such as smart contracts and decentralized lending to improve their services.
  • The DeFi space faces potential regulatory hurdles, exemplified by the SEC’s actions against Uniswap.
  • The development of Layer-2 scaling solutions and crypto bridges are pivotal in enhancing transaction speeds and reducing costs, thus supporting the broader adoption of DeFi.
  • Increased international regulatory cooperation is likely to result in a unified global framework for digital assets, balancing innovation with financial stability and opening up new opportunities for the DeFi sector.

DeFi Industry Is Maturing

As central banks signal towards more rate cuts, the DeFi yields space is gaining significant popularity as an attractive investment form with DeFi markets maturing, Anndy Lian, an inter-governmental blockchain advisor, told Techopedia.

This was also backed by the Exponential report, which noted that over $43 billion were locked into very low-risk DeFi yield contracts.

75% of DeFi total value locked (TVL) is currently in pools offering 0-5% of annual percentage yield (APY).

Total Value Locked in DeFi Yield Markets.
Total Value Locked in DeFi Yield Markets. Source: Exponential.fi

Additionally, new trends in the market are pointing towards more mainstream adoption, with DeFi projects continuing to grow and integrate more and more with traditional finance.

Lian said:

“The focus [of the DeFi space in 2024] seems to be on sustainable growth, improved security, and real-world applications that could lead to wider acceptance and use of DeFi platforms.”

Igor Telyatnikov, CEO and co-founder of AlphaPoint, a digital asset and cryptocurrency trading and investing platform, added that with over $90 billion locked in DeFi protocols, the DeFi market could very much reach and even surpass previous heights of $150 billion locked as previously seen in 2021. He said:

“Despite the challenges faced, DeFi has continued to attract both developers and users, showcasing its ability to innovate and adapt. We are seeing a maturing ecosystem with more robust infrastructure, improved user experiences, and increasing collaboration among projects.”

Decentralized Finance Trends 2024

Over the last year, DeFi applications have undergone significant changes, with a number of new trends starting to show up in the industry, stemming from crypto bridges to a number of Layer-2 (L2) scaling solutions.

Here are some of the biggest DeFi trends experts are paying attention to in the second half of 2024.

1. Traditional Finance Integration

The traditional finance market entering the DeFi space is perhaps the biggest trend in the current DeFi landscape.

Lian noted that the integration of traditional markets into the DeFi space could become a “significant step towards a more inclusive and efficient financial ecosystem,” with traditional financial institutions expected to collaborate more closely with the DeFi space, utilizing features like smart contracts, tokenization, and decentralized lending to enhance their products and services.

Lian said:

“A growing number of financial institutions are projected to adopt DeFi solutions, with significant investments to streamline operations and offer innovative services. The 24/7 operational model of DeFi breaks down traditional barriers of time and geography, offering constant accessibility and borderless transaction capabilities.”

Telyatnikov added that as regulatory clarity improves, the DeFi space could see a lot of exploration of new use cases in collaboration with more traditional institutions.

“Furthermore, the lines between DeFi and centralized finance will blur, leading to hybrid solutions that combine the best of both worlds.”

2. Layer-2 Scaling Solutions

Layer-2 scaling solutions are a prominent tech DeFi example that is expected to play a crucial role in the second half of 2024, AlphaPoint’s Telyatnikov noted. These solutions will enable faster and cheaper transactions while also maintaining the security of the underlying blockchain.

Lian added that the ability of L2 solutions to enhance the scalability and efficiency of blockchain networks is also vital for the growth of DeFi technology.

3. Crypto Bridges

However, major DeFi platforms have seen other emerging trends in the past year, including the development of crypto bridges and Know Your Customer (KYC’d) DeFi, according to Lian. He said:

“The emergence of crypto bridges has facilitated asset transitions to faster layer 2 networks like Arbitrum and Polygon, enhancing ERC-20 token trading while maintaining exposure to Ethereum.”

4. Regulation

AlphaPoint’s Telyatnikov added that over the past year, one of the most significant changes in the DeFi landscape was the heightened regulatory scrutiny.

One example is recent enforcement actions by the U.S. Securities and Exchange Commission (SEC) aimed at Uniswap Labs, which noted that the commission was planning to recommend legal action against the company.

Telyatnikov said:

“The recent Wells notice issued to Uniswap, the largest decentralized exchange by volume, and the ongoing Tornado Cash case have sent shockwaves and warning signals through the DeFi community, particularly in the US. Uniswap, being a significant utility in the DeFi ecosystem, is now facing a direct attack from regulators, creating uncertainty that may take a long time to resolve, similar to the Coinbase lawsuit.”

5. KYC’d DeFi

Such lawsuit cases bring direct challenges to the legal status of DeFi products, their tokens and use cases, which is why there could also be a potential rise of KYC’d DeFi. Know Your Customer procedures are known to align with regulatory standards and reduce illegal activities, which could serve as a limelight for a number of DeFi platforms.

For example, Singularity, a startup developing a protocol to provide institutions with confidential access to DeFi, attracted $2.2 million to develop a KYC-compliant DeFi platform for institutions.

Miko Matsumura, the managing partner at Gumi Cryptos Capital, said in a press release on February 22, 2024:

“Singularity addresses a crucial need in the market, providing institutional users with both the compliance and the commercial confidentiality necessary to participate in DeFi.”

Additionally, the SEC’s new regulatory definitions have the potential to bring decentralized exchanges (DEXs) within the scope of regulations for US broker-dealers, affecting their operations, which could also play a significant impact on the future of the DeFi space in the coming year.

However, global regulatory cooperation and the balance between innovation and safeguarding against financial stability risks will be crucial for further development of the DeFi space.

“The [current] focus seems to be on creating a regulatory environment that supports innovation while ensuring the security and integrity of the financial system,” Lian said.

The Bottom Line

As DeFi transitions from its speculative phase into a more mature and stable environment, the integration with traditional finance and the adoption of advanced technologies like Layer-2 solutions signify a robust future.

Despite facing regulatory challenges, the sector’s innovative response showcases its resilience and potential for sustained growth.

The growing acceptance and implementation of KYC procedures in DeFi could further enhance its legitimacy and foster broader adoption.

Overall, the future of DeFi looks promising, poised to redefine financial landscapes globally as it bridges the gap between traditional and decentralized finance while navigating regulatory challenges.

 

 

Source: https://www.techopedia.com/decentralized-finance-trends

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Decentralized Transactions Challenge Howey Test’s Application to NFTs

Decentralized Transactions Challenge Howey Test’s Application to NFTs
  • The key question is whether NFTs meet the Howey test criteria for classification as securities under federal laws.
  • In the NFT industry, adopting best practices includes transparency, fraud prevention, respecting intellectual property, and ethical conduct.

Non-fungible tokens (NFTs) are unique digital assets that can represent anything from art and music to virtual land and gaming items. They have exploded in popularity and value in recent years, attracting the attention of celebrities, investors, and regulators alike. The legal status of NFTs remains unclear and controversial, especially in the United States, where the Securities and Exchange Commission (SEC) has the authority to regulate securities and protect investors from fraud and manipulation.

One of the key questions that arises is whether NFTs are securities under the federal securities laws, and specifically, whether they meet the criteria of the Howey test, the legal framework established by the Supreme Court in 1946 to determine whether an instrument is an investment contract and thus a security. Howey test has four elements, I will argue that NFTs are not securities. On top of that, I will also address some of the counterarguments and challenges that NFTs may face in the future, and suggest some possible solutions and recommendations for the industry and the regulators.

NFTs are not investments of money, but rather purchases of digital goods

The first element of the Howey test is whether there is an investment of money or something of value in exchange for the instrument. This element is usually easy to satisfy, as most financial transactions involve some form of payment. However, in the case of NFTs, the payment is not an investment, but rather a purchase of a digital good.

They are not shares, bonds, or derivatives that represent a claim or a right to a future cash flow or a share of profits. Rather, they are digital tokens that prove ownership and authenticity of a unique digital asset. In my point of view, they are similar to other digital goods, such as e-books or music downloads, that consumers buy for personal use and enjoyment, not for investment purposes.

NFTs are not common enterprises, but rather individualized and decentralized transactions

The second element of the Howey test assesses the presence of a common enterprise, where investors’ fortunes are tied to the success of an issuer or third party. However, in the case of NFTs, no such common enterprise exists. Transactions are decentralized and individualized, with various artists and creators minting NFTs across different blockchain networks like Ethereum or Solana. NFT buyers rely on blockchain‘s public ledger to verify authenticity, rather than trusting a specific issuer or promoter.

NFTs do not generate profits, but rather subjective value and utility

The third element of the Howey test concerns whether there’s a reasonable expectation of profits. Unlike traditional investments, NFTs don’t generate income or appreciate based on others’ efforts. Instead, their value comes from subjective qualities like rarity, originality, and cultural significance, rather than anticipated financial returns. NFT buyers don’t expect profits but rather value the assets for their intrinsic qualities and utility.

NFTs are not dependent on the efforts of others, but rather on the creativity and innovation of the creators and the community

The fourth element of the Howey test examines whether profits stem from the efforts of others. Unlike traditional securities, NFT profits aren’t reliant on issuer or third-party services. NFT value is driven by the creativity and innovation of artists and developers, not centralized platforms. Buyers assess and appreciate digital assets based on personal judgment, rather than external influences.

Counterarguments and challenges

Despite the arguments in favor of NFTs, potential challenges from regulators and courts may arise in the future. One such challenge is the classification of certain NFTs as securities under regulatory tests like the Howey or Reves tests. Depending on their characteristics, some NFTs could represent real-world assets or rights, potentially falling under the definition of securities, especially if they promise future cash flows or resemble investment instruments.

Moreover, even if NFTs don’t meet all elements of the Howey test, they might still be deemed securities through a flexible analysis. For instance, if they are marketed as investments or show characteristics of speculative opportunities, they could create expectations of profit, thus falling under securities regulations. Additionally, if buyers pool funds or share risks and rewards, or if the NFTs’ value depends on underlying asset performance, regulators might consider them securities.

Furthermore, beyond securities laws, NFTs could be subject to various other regulations based on their nature and function. Anti-money laundering and sanctions regulations might apply if NFTs facilitate illicit transactions. Tax regulations could come into play if NFT transactions generate taxable income or capital gains. Consumer protection laws might be relevant if NFTs involve deceptive practices or breach contracts. Intellectual property regulations could be triggered if NFTs infringe upon original creators’ rights.

My take: Possible solutions and recommendations

Given the uncertainty and complexity of the legal landscape surrounding NFTs, it is important for the industry and the regulators to work together to find possible solutions and recommendations that can balance the interests and needs of all the stakeholders. Here are some suggestions from me that may help to achieve this goal:

  • Industry stakeholders should adhere to best practices and standards to improve transparency, accountability, and compliance in the NFT market. This includes clear disclosure of terms and conditions for NFT transactions, implementing measures to prevent fraud and illegal activities, and respecting intellectual property rights. Additionally, they should engage in responsible and ethical behavior, avoiding harm to the environment, society, or public interest.
  • Regulators should adopt a flexible approach to regulate the diverse NFT market. Avoiding overly restrictive frameworks is crucial to foster innovation and growth. Recognizing nuances among NFT types and consulting with industry and community for feedback is essential. Continuous monitoring and evaluation of market evolution are necessary to update policies accordingly.

Conclusion

NFTs are a new and exciting phenomenon that has revolutionized the digital economy and culture. They offer unprecedented opportunities and challenges for the creators, consumers, and regulators of the digital assets.

The legal status and implications of NFTs are still unclear and uncertain, and may vary depending on the facts and circumstances of each case. Therefore, it is important to understand and address the potential legal issues and risks that may arise from the creation, distribution, and consumption of NFTs, and to seek appropriate solutions and recommendations that can foster a healthy and sustainable NFT market.

 

Source: https://www.financemagnates.com/cryptocurrency/decentralized-transactions-challenge-howey-tests-application-to-nfts/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j