Crypto Firms Aim to Build Trust in Future Products and Services

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The cryptocurrency ecosystem has had a turbulent year in 2022. Critics inside and outside the crypto industry have been stoked following the collapse of FTX, Celsius, Three Arrows Capital and the Terra ecosystem.

A number of casualties were recorded as a result of these events. Blockchain analytics firm Chainalysis published a report in December last year, which noted that the depegging of the Terras stablecoin, Terra USD Classic (USTC), had seen weekly realized losses peak at 20.5 billions of dollars. The results further show that the subsequent collapse of Three Arrows Capital and Celsius in June 2022 saw weekly realized losses reach $33 billion.

Although these events may have resulted in a loss of confidence within the crypto ecosystem, it is important to emphasize that blockchain technology and cryptocurrency did not fail. To put that into perspective, Dan Morehead, COO of Pantera Capital, a US-based cryptocurrency hedge fund, said in a December 19, 2022 letter to investors:

The narrative that blockchain skeptics and some regulators and politicians are spreading misses the point. The collapse of FTX has nothing to do with blockchain technology. It wasn’t crypto that failed. Bitcoin and all other protocols worked flawlessly.

According to Moreheads, companies in the crypto and blockchain industry continue to create and release products, despite recent events. In fact, a number of projects are focusing more than ever on building trust in products.

Companies aim to ensure trust

Paul Brody, global blockchain leader at EY and board member of the Enterprise Ethereum Alliance, told Cointelegraph that he sees renewed respect for the value of rules, regulations and the idea that the rule of law has a role to play in the crypto industry. The narrative that the code is the law doesn’t seem to come up as much in discussions anymore, he said.

Given this, Brody believes that auditors, regulators, and mathematical evidence will play a vital role in building transparent trust in the crypto industry:

I think we can expect a future where not only will the code be published, but companies will publicly appoint external auditors and welcome regulatory inspections. I think there is also a role to play for more standardization of how companies in this sector report their data.

According to Brodys, a number of crypto companies have started to emphasize audits and data reporting. For example, Jordan Kruger, co-founder of Vesper Finance and head of decentralized finance (DeFi) at the Web3 Bloq infrastructure layer, told Cointelegraph that his company had undergone a number of audits. since its launch in 2021.

It has undergone more than fifty independent audits of the multiple smart contracts that make up its pools and strategies, she said.

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Kruger noted that while this has been important to Vespers users, regular audits should be seen as contributing to the DeFi ecosystem as a whole. Our focus on software quality means that when other DeFi protocols integrate with us, they can partially write behind Vespers significant investments in auditing. This is an important point, as DeFi protocols have witnessed some of the biggest hacks and scams in 2022. Regular smart contract audits may have prevented some of them from happening.

In addition to audits performed on DeFi protocols, the non-fungible token (NFT) industry is beginning to implement audits, especially with respect to phygital offerings or physically-backed NFTs. For example, Jake Spinowitz, community manager at Courtyard, an NFT marketplace that allows collectors to trade and store physical collectibles, told Cointelegraph that Courtyard conducts third-party audits of its custodial items to ensure the trust and transparency.

Additionally, Spinowitz explained that Courtyard was working with security provider Brinks to protect physical assets related to digital twins. When tasked with protecting someone’s valuable physical assets, there should ideally be a proven ability to securely store, handle and transport those assets (to further mitigate risk, any physical collectibles that we keep are insured at market value), he said.

The combination of audits, coupled with the use of a legacy security institution, can serve as a model of success for phygital projects in the future. This could certainly be helpful, as a number of phygital platforms have expressed concerns about the process of redeeming and storing physical NFT assets.

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

For example, our login feature gives you the ability to share off-chain profile data to earn rewards from your favorite DApps or display your domain on a leaderboard. The data you share is completely opt-in, she explained. Additionally, Carter noted that unstoppable domains have recently changed the way domains are created. All domains will now be automatically created on the blockchain, as opposed to the Unstoppables database, she said.

Chris Castig, co-founder of Console.xyz, a web3 chat platform, told Cointelegraph that the trust-driven Web3 principles should ensure the minimum impact that any human being, group or institution can have on users of the app. As such, he explained that platforms like Console allow users with social graphs, which include their followers, network and more, to live on the blockchain. He precised :

We use smart contracts and NFT integrations so that social graphs live outside of our app and on the blockchain. This means that if your community ever wanted to leave the console, it’s easy to find a new home elsewhere. Your community belongs to you, not us.

Castig further noted that his company uses Ethereum Name Services (ENS) for identity rather than usernames. ENS names (.eth) or any equivalent decentralized identity like (.btc, .tez, etc.) can be used to replace usernames and passwords on your site, he said. In turn, an additional layer of user privacy and trust is achieved.

On a social site where I interact with other people, my ability to use a consistent username across all sites imparts trust to other users. Using my own ENS name also means I own my identity, not the humans behind the app, Casting said.

Will crypto ideals remain with additional trust built in?

While regular audits, data reporting, and transparent privacy measures may become the norm for many crypto projects in the future, some might wonder if this will impact the trustless nature of cryptocurrency. .

While this is a legitimate concern, Brody explained that the trustless nature of crypto is no longer feasible. It was somewhat achievable in the early days of pure crypto when you could self-guard and everything you needed to know was on-chain. Yet the moment we moved from pure crypto to real-world assets and complex smart contracts, that became impossible, he said.

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Brody added that the cryptocurrency ecosystem should no longer aim for trustless crypto and blockchain, but rather decentralized and regulated crypto. If properly implemented, Brody believes that all of the benefits crypto promises will still be achievable. He said:

Decentralization means that no company can become a gatekeeper or a monopoly. Regulation means we can see, understand and compare companies and partners and determine who is worthy of our trust.

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