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Astra Protocol Team Explains How to Create Trust Beyond Blockchain-based Smart Contracts

[vc_row][vc_column][vc_column_text]The use of blockchain-powered smart contracts, which automate and support a democratized decision-making system, is becoming a salient feature of nearly all decentralized projects.

Smart contracts are considered an essential component of any decentralized system, including the emerging decentralized finance (DeFi) sector, because such automated agreements help establish trust in platforms or projects. This way, a newly-launched initiative may be perceived (and actually be) as safe for investment.

Given the recent increase of new DeFi projects, as well as the rising number of disturbing exits, a blockchain initiative may need more than just smart contracts to really earn the trust of investors and stakeholders. So, what can be done that would make a meaningful and positive difference?

Patenting Smart Contracts May Address Key Business Requirements

One viable solution to these issues is a patent. Unlike the blockchain itself, which is an open-source tech and data structure that can’t be patented (in most scenarios), smart contracts can form new digital agreements that may be well-suited for a specific project. This is the reason why patenting smart contracts may be considered ethical and even essential for blockchain or distributed ledger technology (DLT) projects.

Proof of Trust is an innovation that aims to support the role of patents as a key part of a company’s end-to-end business processes.

The intellectual property (IP) of Proof of Trust is reported to number more than 30 awarded patent claims, with all patents reportedly being issued by the US Patent and Trademark Office. This could give investors a lot more confidence in a project and its commitment to deliver on its promises.

In addition to these developments, the Astra Protocol has been developed to provide decentralized organizations a legitimate means to adhere to regulatory guidelines while remaining operating in a decentralized manner. At a critical time in which there’s a sharp rise in fraudulent activity, Astra plans to provide the confidence required by industry participants to enter the crypto space.

Astra intends to offer the legal technology or Legaltech layer for crypto that may be integrated with emerging DeFi protocols. Funds must always reach the intended destination in a safe manner, which is what Astra plans to provide.

And in case there are any problems, then the team can take care of them and return the money in a seamless manner. Any issues can be addressed amicably with the addition of a conflict clause (which is actually what Proof of Trust is) to the platform and its smart contract.

As noted by the Astra team, this is all based on a Proof of Trust system, which is a built-in protection layer and mechanism that ensures peace of mind when performing monetary transfers and finalizing contracts through extra-judicial and extra-jurisdictional dispute resolution systems.

Establishing Trust Beyond Just Smart Contracts

It’s worth noting that filing for a patent can take a really long time and the process can be quite intense. On average, it can take anywhere between 12 to 22 months for a patent application to be processed and approved.

And the majority of patents are issued for a limited timeframe, which is usually around 20 years, and after this period has elapsed, the patent is made open-source. Moreover, the Astra Protocol team explains that greater trust also means more responsibility, for any initiative, especially when having to put in the additional time and effort.

As the crypto markets continue to mature, there’s been an alarming increase in illicit activities carried out by blockchain-related projects. That’s why it is important to look out for reasons to establish trust in a project beyond just smart contracts. In the majority of cases, a patented project should provide the reassurance that’s required to get involved.

The team at Astra Protocol has also previously noted that operating within DeFi space comes with “unpredictability” but also key opportunities. They’ve explained that many of the potential benefits of the underlying blockchain and smart contract tech also come with certain challenges.

The DeFi market is growing steadily and malicious actors are known to anonymously exploit different weaknesses in protocols to steal large amounts of funds.

In these scenarios, there’s usually no path to justice for the victims, the Astra Protocol team has explained. They also noted that with its rise in adoption during 2021, the news that often gets associated with DeFi involves damaging security breaches.

In 2020, 17 large DeFi scams had taken place and led to a loss of at least $154 million, the Astra Protocol team reveals. And by July of this year, DeFi-related exploits represented over 75% of crypto-related crime.

Providing a Decentralized LegalTech Layer

The Astra Protocol team has pointed out that there’s “a signal of uncertainty to potential investors in the sector” and motivation for law enforcement and financial authorities “to intervene within the market.”

In order to address these issues, Astra aims to serve as the decentralized legal technology platform focused on protecting industry participants from criminal activities. Astra also mentioned that they aim to bring trust to the DeFi market and reassure users that their investments are adequately protected.

With the appropriate protection from Astra, DeFi and digital assets are set for institutional adoption, the developers have noted.[/vc_column_text][/vc_column][/vc_row]

Astra Protocol May Assist the US SEC with Ensuring Protection of DeFi Users’ Assets, Allowing for Safer Crypto Adoption

[vc_row][vc_column][vc_column_text]Major crypto firms such as Coinbase (NASDAQ: COIN) and Ripple have suggested a framework for crypto and digital asset regulation.

Overall, their approach is meant to provide a proper way for the blockchain and crypto industry to move forward. Crypto analysts believe that an effective approach to regulation would account for the key capabilities of virtual currency platforms and give them an opportunity to develop their products and services.

Industry analysts believe that ideal public policy outcomes may be achieved by close collaboration between public-private entities. A truly effective approach should be able to help with adapting applicable regulatory frameworks while encouraging the establishment of crypto innovation sandboxes.

Digital currency and blockchain or distributed ledger tech (DLT) platforms require clear regulatory and licensing frameworks, which can address the different challenges the industry has been facing.

DeFi Industry Needs More Regulatory Clarity

The suggested measures in these proposed digital asset frameworks intend to offer more legal clarity to industry participants as well as a better alternative to regulation-by-enforcement, which is a controversial (and heavily criticized) approach taken by the US Securities and Exchange Commission (SEC).

Lawmakers in the US and other nations are seriously looking into learning more about the wide range of cryptocurrency and decentralized finance (DeFi) platforms. It has become imperative to create a comprehensive policy framework for crypto-assets and this may be achieved through  clear communication between private and public actors, according to industry experts.

Crypto professionals also believe that public-private collaboration needs to be at the center of any meaningful legislative proposal. Any policy framework that’s meant to regulate digital currencies needs to encourage continuous dialogue between regulatory authorities and crypto industry participants. Moreover, public-private collaboration could result in improved policy outcomes for the crypto sector as well as individual consumers.

US financial markets are globally recognized because of their effective regulatory framework under which they consistently operate.

Astra Protocol May Help Authorities with Regulating Crypto Platforms

An innovative platform launched by developers of the Astra Protocol aims to serve as the decentralized compliance layer for DeFi. The Protocol’s developers have noted that the Chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, has pointed out that consumer protection needs to improve in the crypto-asset industry.

Gensler and other US policymakers have called for improved regulations for the nascent crypto and DeFi space in order to prevent fraud and other serious issues. The Astra Protocol team also notes that large-scale money laundering cases across different DeFi platforms has led to regulators paying a lot more attention to this emerging industry.

According to the Astra Protocol team, we need a highly secure, decentralized compliance platform to address these serious concerns while being able to seamlessly adapt to ever-evolving and sophisticated criminal activity.

Notably, the platform needs to be able to handle the constantly-changing regulatory landscape, as laws including the “Cryptocurrency Bill 2021” and the “Keep Innovation in America Act” are passed.

As explained by Astra, the Bank Secrecy Act requires decentralized institutions that are trading regulated financial instruments to conduct KYC and ensure proper AML compliance rules are being implemented.

As noted by the Astra team, one of these updated requirements is “Independent testing for compliance to be conducted by the futures commission merchant or introducing broker in commodities’ personnel or by a qualified outside party.” In order to address these guidelines,  Astra Protocol has specifically developed their platform to fulfil this role for DeFi and crypto networks.

As noted by Astra, the “Travel Rule” is an effective way to address issues involving money laundering, terrorist financing, and other types of illicit activities. At present, virtual-asset and DeFi platforms have a wide range of approaches to ensuring due diligence, KYC, and handling  AML/CFT procedures.

US Crypto Investors Still Facing Serious Risks

But there are still a fairly large number of platforms still accessible to US investors that have no standardized or proper KYC processes. Moreover, weak KYC is still a serious issue as would-be criminals are able to circumvent these barriers. And investors are still at considerable risk from exploits/hacks, fraudulent activities, and theft as long as they are not working within a system that offers robust KYC/AML solutions.

As DeFi gains more users, it will definitely require a proper regulatory system so that investors are afforded the protection they need. In order to play by the rules, DeFi protocols will have to make significant investments in a proper compliance layer as soon as possible. If they don’t take such measures, then governing entities could strictly penalize those who violate applicable AML rules, as the SEC has clarified on many occasions.

Astra further notes that their mission is to provide all DeFi protocols and Virtual Asset Service Providers (VASPs) with a completely decentralized compliance layer. Their product offerings include KYC/AML services to act as a tool to tackle everyday compliance issues by leveraging the industry know-how of reputable legal firms.

As noted by its creators, Astra has been specifically designed to bridge the gap between regulators and crypto/DeFi industry innovators. Astra Protocol’s offering aims to support the best quality KYC and other appropriate due diligence procedures via applicable frameworks from renowned legal organizations.

Astra Protocol to Offer Comprehensive LegalTech for Different Jurisdictions

Their platform provides decentralized organizations and VASPs a proper mechanism to follow various regulations implemented by jurisdictions throughout the world. For novice DeFi traders or investors, their patented tech calls upon industry professionals from different legal and accounting companies to carry out relevant AML/KYC processes.

They aim to provide a secure service to all customers that has been tailored to any jurisdiction’s specific requirements. In addition, they provide clients a comprehensive analysis of various risks for any DeFi user based on recognized money laundering / terrorism financing flags. With Astra, decentralized platforms are able to regularly demonstrate that they’re aware of and effectively reacting to serious dangers while preventing suspicious transactions as needed.[/vc_column_text][/vc_column][/vc_row]

What Should Regulation Look Like For DeFi?

[vc_row][vc_column][vc_column_text]With the world steadily adopting cryptocurrencies and adjoining innovations, many have also continued to cry foul about the risk of putting money in a young market. While traditional systems have remained relatively stagnant and overregulated, DeFi offers an alternative that is ever innovative.

Peer-to-peer payments enabled by cryptocurrency have increased involvement in the global economy for millions of people who do not have access to traditional banking services. The advent of decentralized finance (DeFi) promises to broaden access to financial services such as savings, loans, derivatives, asset management, and insurance.

People use DeFi to lend or borrow money and earn interest. However, instead of transacting through a third party acting as a mediator, users can interact directly between themselves (with no intermediary) via smart-contract programs.

This financial inclusion-enabling innovation should be able to thrive in a regulated environment in which individuals and institutions are safeguarded and suspicious conduct is discovered and reported. But how do you regulate without fully eliminating the key features of financial inclusion and decentralization? Astra Protocol has the answer.

The DeFi Regulation Problem

Decentralization is the core philosophy behind DeFi. DeFi has grown during a period of overall economic prosperity and continuous rise in cryptocurrency prices. The steady increase in the value of collateral locked in DeFi protocols indicates that neither individual protocols nor the system as a whole has yet been stressed. It is unclear what will happen to interconnected protocols if one or more of them suffers from significant market-wide pricing fluctuations or large-scale technical outages.

This is a significant concern because DeFi has the potential to be a vector for all three of the primary risks that financial regulators are tasked with managing. The first category is criminal conduct, which includes money laundering, tax evasion, and terrorist financing. The second issue is fraud, which was on full show during the 2017 initial coin offering (ICO) boom, helped by early implementations of DeFi. The third goal is to reduce systemic risk. DeFi and crypto are still unlikely to be large or influential enough to cause widespread financial disruption in the case of a significant market collapse or system failure, but you never know.

Regulators have traditionally relied heavily on the people who administer traditional platforms to control those risks by monitoring their customers and suspicious activity on their platforms. The situation is different with DeFi.

DeFi transactions done between individual users using unhosted wallets, for example, are exempt from Bank Secrecy Act (BSA) procedures like as Know-Your-Customer and anti-money laundering checks. The applicability of the BSA and related FinCEN laws is dependent on the participation of intermediaries offering hosted wallet, exchange, or other specified services, according to Financial Crimes Enforcement Network (FinCEN) guidance. Furthermore, because DeFi protocols permit anonymous transactions, market participants subject to the BSA currently have no practical way of determining what obligations apply to their DeFi transactions. These are also all applicable when thinking about sanctions that apply to DeFi activities.

Although DeFi projects do not fit well into the present financial regulatory framework, this does not mean that policymakers or regulators should not or cannot control them. As DeFi projects grow in size, it’s becoming clear that they may pose the same kinds of risks that financial regulation is supposed to address. Financial crime, consumer protection, and financial stability issues are among them.

What Does Regulation Look Like?

To address DeFi issues, regulators must incorporate them into their public policy objectives, which include investor protection, market integrity, and the prevention of financial crime. Classification considerations will be difficult, as they are in any new market. The plethora of existing regulatory categories evolved as a result of many statutory and administrative frameworks built with centralized financial services in mind.

Regulators must modify the existing regulatory framework to accommodate DeFi services. They can learn from approaches that are working in the current cryptocurrency industry. Specialized divisions, such as the Securities and Exchange Commission’s FinHub and the Commodity Futures Trading Commission’s LabCFTC, enable regulators to gain experience in new technology, communicate productively with the sector, and provide informal regulatory guidance. Disclosure rules or safe harbors might encourage market players to give regulators with information that will assist them in better understanding market dynamics and developing best practices.

Regulatory sandboxes, such as the one established for fintech by the United Kingdom’s Financial Conduct Authority, provide a safe area for regulators and new services to work through challenges. Security and Futures Act in Singapore also represents a similar regulatory model. Furthermore, authorities should initially clarify relatively simple issues in order to provide direction to the industry. This allows regulators to focus on more difficult issues while ensuring market participants remain secure.

Another way to regulate without sacrificing decentralization is to implement regulatory protocols hard-coded into DeFi platforms or added as a layer to existing platforms. One of such layer is the Astra Layer, a legal compliance and regulatory protocol for the DeFi space.

Astra As A Regulator 

The Astra Protocol provides a unique way for decentralized entities to comply with global standards and regulatory norms while remaining decentralized. At a crucial moment when there is so much skepticism, Astra strives to instill the required trust in the crypto and blockchain ecosystems.

Astra’s goal is to develop a legal layer that can be linked to any existing DeFi platform. Astra ensures that funds are always delivered safely to their intended recipient. If there is a problem, the team can quickly rectify it and return the cash. Any issues can be resolved amicably by including a conflict clause – also known as proof of trust – in the platform and smart contract.

This innovation is predicated on a Proof of Trust system, which delivers peace of mind in commercial transactions and contracts via an extra-judicial and extra-jurisdictional dispute resolution method. The PoT system aids in the rapid resolution of inadvertent or fraudulent transactions, hence protecting stakeholders.

To resolve all problems, Astra uses a combination of human knowledge and technology. This includes human mistakes, accidental payments, and fraudulent transactions.[/vc_column_text][/vc_column][/vc_row]

As DeFi adoption grows, Astra Protocol will rescue the sector from mishaps

[vc_row][vc_column][vc_column_text]Since the release of Satoshi’s Bitcoin whitepaper in 2008, numerous key developments in the blockchain industry have evolved, altering the direction of the entire ecosystem and the broader financial market. One of these trends is decentralized finance (DeFi).

The exponential expansion of the DeFi market highlights the promise of digital currencies and decentralized platforms to provide an alternative to the traditional finance system, which has experienced persistent stagnation for decades, restricting innovation and deemphasizing financial inclusion. Within the growing digital economy, DeFi is laying the groundwork for permissionless, blockchain-based financial services.

Decentralized Finance (DeFi) enjoyed a boom in 2020, with a 14x increase that year. DeFi is already a billion-dollar market worth $80.4 billion, and experts predict much greater growth in the coming year. Matthew Roszak, an experienced crypto investor, believes that the DeFi sector would grow tenfold to become an $800 billion sector as a result of growing mainstream crypto acceptance, the worldwide search for yield, and increased inflation.

However, despite the gold rush for the sweet spots of the DeFi sector, there are several issues facing this new sector. Astra, a legal compliance and dispute resolution protocol is here to help.

DeFi explained

Decentralized finance (DeFi) is an umbrella word for a multitude of public blockchain applications and projects aimed at disrupting the existing finance world. DeFi is defined as financial applications built on blockchain technologies, generally employing smart contracts, and is inspired by blockchain technology. Smart contracts are automated enforceable agreements that can be accessed by anybody with an internet connection and do not require middlemen to execute.

DeFi refers to applications and peer-to-peer protocols built on decentralized blockchain networks that do not require access rights for simple lending, borrowing, or exchanging of financial tools.

One of the most appealing aspects of adopting blockchain technology to reimagine banking is how the market may become permissionless and available to everybody. Another draw is the concept of composability, which means that anyone can combine any existing DeFi offering to create a new one. The modularity of such a network, which is essentially made up of interlocking blocks, also means that subsequent developments and demands in the finance space may be readily built on top of the network and integrated together, with everything governed by smart contracts.

Because smart contracts are essential to DeFi applications, the majority of DeFi projects are being developed on the Ethereum network. This is due to the widespread availability of developer capabilities to work with Ethereum’s Solidity programming language, which allows for the generation of the required smart contracts. However, several other blockchain networks, such as Solana, Polygon, and BSC, now allow DeFi applications as well.

DeFi sectors continue to thrive

Despite the fall in May, DeFi has continued to grow exponentially.

  1. Decentralized exchanges (DEX):

Trading volumes on DEX increased by over 8,000 percent in the first quarter of 2021 compared to the same period last year, according to Messari. Curve Finance and Uniswap are the two largest DEXs in terms of trading volume and TVL.

  1. Asset management: 

Yearn.finance continues to dominate DeFi’s asset management sector. Yearn’s TVL has increased from around $500 million at the start of the year to nearly $4.5 billion as of today.

  1. Stablecoins:

Stablecoins have played a significant part in DeFi, serving as a link between the burgeoning digital economy and traditional finance. USD Coin (USDC), a USD-backed digital currency developed in 2018 by Circle and Coinbase, was the fastest-growing stablecoin in both 2020 and 2021. The overall market cap of stablecoins has risen from around $25 billion in January to more than $109 billion as of June 2021.

  1. Derivatives: 

Futures and options are the next big thing being built on decentralized exchanges. Projects such as Hegic, Perpetual Protocol, and Mirror Chain are gaining traction in the DeFi community.

Growth with risk attached

Many DeFi programs on the market today have a host of flaws. Hundreds of more projects lack the financial and regulatory safeguards and compliance requirements that are presumably required of them, rendering them vulnerable to a regulatory crackdown. Some of these projects, such as Yearn.Finance, has also been hacked and has lost millions of dollars.

Another problem associated with DeFi is that they are emerging types of products created by non-financial people. Product structuring is a sophisticated procedure that is best refined by skilled financial engineers at investment banks.

Other risks arise from smart contract failures and other human errors as a result of centralization on “DeFi” systems that are not totally decentralized due to a lack of experience in the embryonic DeFi sector.

In addition, there is no clear regulation of the world’s fragmented financial system. Most individuals do not trust the system because governments or central banks have no control over transactions. Furthermore, municipal governments in some nations may restrict cryptocurrency without prior notice. This is one of the most serious issues with DeFi technology.

The risk of criminal conduct is likewise increased due to a lack of regulation. Because the system provides anonymity, anyone can send or receive money without identifying their identities, giving crooks greater alternatives.

Furthermore, because smart contracts act as middlemen for DeFi platforms, their flaws might disrupt the operation of DeFi ecosystems. Smart contracts are programmable algorithms that simulate traditional (actual) contracts.

After the conditions are entered into it, a smart contract controls the execution of the contract between the two parties. The presence of an error or bug in the code, on the other hand, can result in the loss of funds locked in the smart contract.

Knowing all the aforementioned risks may drastically reduce trust in the DeFi sector. Billionaire crypto investor Michael Novogratz tweeted that if the risk persists, the sector may face further regulatory sanctions and legislation. He advised that DeFi developers should add a compliance layer to help mitigate these risks.

As DeFi developers and users grapple with these issues, the Astra protocol has been developed to serve as the backbone of DeFi in terms of regulation and stakeholder protection. By providing legal assurance to smart contracts, the protocol works as an on-chain dispute resolution layer.

Astra Protocol: DeFi’s compliance layer

The Astra protocol provides a legal layer that connects to any existing DeFi platform. Astra is the default mechanism for resolving any potential issues that may arise from blockchain transactions.

To be more specific, smart contracts are essential components of any decentralized system, such as DeFi. It aids in the establishment of trust in a secure investment. However, there is no regulator or oversight role in place to supervise decentralized protocols that successfully reduce doubt, potential fraud, and provide a competent dispute resolution system. All of these capabilities, in addition, would pave the way for everyone to have public, permissionless blockchains – exactly what Astra Protocol aims to provide.

To tackle all issues, Astra employs a combination of human skill and technology. This includes, if they occur, human mistakes, fraudulent transactions, and accidental payments.

As a result, all parties and transactions are completely legally protected. It is a cost-effective and expedient method of resolving any issues that may emerge, as well as adding an added layer of peace of mind to any engagement.

Conclusion

It is a difficult undertaking to provide a layer of assurance to decentralized finance. With so many initiatives, protocols, services, and yield farms, huge sums of money are freely flowing with huge risks. Astra provides a solution to DeFi issues by simply incorporating their protocol into the platforms.[/vc_column_text][/vc_column][/vc_row]

Regulations to enhance DeFi growth

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Regulations coming to the world of DeFi now seems inevitable, but that may not be a bad thing. We believe this will be the start of a second wave of incredible growth. Some estimates even suggest that the DeFi market could soar into trillions of dollars, provided carefully devised rules are brought in to protect consumers and investors.

First, it is a myth that by enforcing KYC, DeFi automatically becomes centralized. With KYC, a DeFi platform would continue to offer decentralized financial transactions, providing an intelligent solution is available to assist with the due diligence procedures. This is where Astra will be instrumental. DeFi with KYC from Astra will still be able to offer all those innovative products as before, but with greater security and consumer protection. What’s not to love about that?

In essence, DeFi lending and borrowing platforms from the likes of AAVE or Compound aren’t offering anything wildly different from traditional finance platforms. Except, in the decentralized world, you get around 5% interest rates, compared to around 0.5% with conventional finance platforms. The primary reason for this vast difference is due to smart contracts that reduce the need for so many intermediaries, this allows for the attractive interest rates DeFi users experience. These impressive rates will still be available with KYC and enhanced user verification, except major financial institutions will now be more inclined to participate.

Astra technology can verify the credentials of would-be DeFi users so that decentralized platforms can comply with the UK and global regulations and strengthen AML and CFT processes. Our technology is agnostic of the platform and can work with any existing public blockchain. Upon receiving a request from a new user, the decentralized organization would use Astra as the decentralized compliance layer without requesting and storing KYC information themselves, which many are reluctant to do.

The beauty of Astra’s technology is that it uses experts (known as Delegates) from a pool of highly trusted and accountable individuals to review KYC when needed. Many have worked for globally renowned institutions such as KPMG, PwC, EY and Deloitte and bring unrivalled experience and expertise. The platform allows Delegates to work remotely from anywhere in the world, meaning Astra can select the most appropriate people to review each case regardless of location. Whether companies seek compliance in the US or Vanuatu, Astra has experts with the right experience and knowledge.

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Could This Startup Bridge Between Regulators And The Defi Space?

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“THE ASTRA PROTOCOL GIVES DECENTRALIZED ORGANIZATIONS A UNIQUE MEANS TO COMPLY WITH GLOBAL RULES AND REGULATORY NORMS WHILE THEY REMAIN DECENTRALIZED.”

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Even those wary of the development of cryptocurrencies will most probably recognize how fascinating the underlying blockchain technology is. One use of this technology, decentralized finance or DeFi, is at the cusp of significant expansion. Regulators are conscious of this rise and are acting accordingly.

DeFi is sometimes compared with the “wild west” by regulators looking at buggy smart contracts and flash loans. Nevertheless, the steady rise of DeFi has continued, and nothing seems to discourage VC funds from investing in several projects in the space.

Bitcoin is the most important effort to bypass established financial institutions, but the DeFi sector expands into insurance, lending, commodities trading, and even savings accounts far beyond cryptocurrencies. While cryptocurrencies were created as an alternative to fiat currencies, DeFi is based on the philosophy of replacing legacy systems.

As web3 and other parts of decentralization gains prominence, many have bought into the DeFi hype and what it offers the average crypto enthusiasts. The change in consumer behavior,  which is often linked to the pandemic, has caused the price performance of assets like Bitcoin and Ethereum to be phenomenal in recent years. They are not just speculative, but Bitcoin displaces gold as a safe haven asset.

DeFi developers write the software and then leave the project to enable it to operate without a central entity. They contend that such a decentralization negates the necessity for SEC scrutiny, saying that certain cryptocurrencies, like bitcoin and ether, are decentralized enough to prevent regulation.

DeFi’s Expanding Services 

DeFi can be described as alternative financial products and services based on blockchain. DeFi platforms allow users to engage in typical financial activities, such as lending and loaning, through direct peer-to-peer exchanges by directly mediating value transfer and eliminating the role of traditional financial middlemen. Transactions are made on a public blockchain, not by a bank or other central entity. DeFi services have a non-custodial design that means that theoretically the assets issued or managed on DeFi platforms cannot be unilaterally relocated or expropriated from parties other than the owners of the account.

DeFi leverages open protocols and decentralized applications or DApps to carry out transactions. Smart contracts, programs that work automatically when certain criteria are fulfilled are built on existing blockchains like Ethereum and Solana, and supply these protocols and DApps. Intelligent contracts replace the central financial institutions’ intermediate role in a blockchain using self-executing lines of code.

In the last year, total value locked as collateral in DeFi applications grew from under $2 billion to over $80 billion, according to data collected by DeFi Pulse.

Urgent Need Of Regulation

Advocates of cryptocurrency opposed early attempts to regulate the software’s underlying codes by saying that projects of open source are protected speech. But DeFi poses a lot of risk to the average user that makes it important that decentralization shouldn’t deter the need to regulate.

Firstly, many DeFi protocols, including nine of the biggest DeFi projects, are built on Ethereum. DeFi’s increased customer base has led to an appropriate rise in attack, bug, and network congestion. Ethereum’s public blockchain architecture is far from infallible. This might lead to high transaction costs for the network, unsuccessful transactions, and settlement problems. The high congestion in the network has in some circumstances brought DeFi applications to a standstill. For example, network congestion created a serious breakdown in the DeFi application in March 2020, leading to a total auction off over $8.32 million of cryptocurrency.

Secondly, the crypto market volatility is known. For example, in 2018, Bitcoin dropped more than 80 percent before it rebounded, approaching its worst recorded bear market. And unforeseen external variables such as social media might influence the market. For example, after Elon Musk posted a meme that many interpreted as Tesla could decrease its Bitcoin holdings, Bitcoin plunged significantly.

While panic buying produces big increases and leads to higher value above the genuine worth, panic selling of DeFi tokens may also lead to crashes which with fiat currencies would be unlikely. In June 2021, for example, tokens with a Crypto Village Accelerator and Galaxium Accelerator lost more than 60% over 24 hours. In the same 24- hour period, well-known tokens like Uniswap lost 7%.

Another issue is that DeFi is in her early years. The majority of the space services are programs that automate financial transactions and replace the bank’s traditional position as a broker. This leads to a number of dangers and an uncertain regulatory environment. The lack of intermediaries, the anonymity of pair-to-peer transactions, and DeFi’s worldwide reach pose a possibly increased risk for participants to comply. If regulatory organizations do not provide clear direct direction, DeFi platforms risk ambiguous conformity and legal responsibilities. They can involve a number of aspects, from anti-money laundering to consumer protection.

Investors, professionals, and regulators alike have urged for more regulatory clarity in the DeFi ecosystem in order to address these challenges. The Astra protocol, legal compliance and consumer protection layer, is a new program that is built as a regulator in the DeFi space. The protocol acts as an on-chain layer of assurance and safety for the ordinary DeFi user.

Astra Protocol: Regulation, Protection, Compliance

Smart contracts automating a decentralized decision-making system are a common component of all blockchain decentralized projects. It is a fundamental part of any decentralized system, including DeFi, as it creates confidence in the project as a secure investment. However, a regulator or regulatory protocol should be developed to help eliminate any ambiguity, prevent fraud and resolve disputes, ensuring that the public blockchains are safe for all users.

The Astra Protocol gives decentralized organizations a unique means to comply with global rules and regulatory norms while they remain decentralized. At a critical period in which there is so much suspicion, Astra seeks to provide the necessary confidence in the crypto and blockchain ecosystems.

Astra aims to create a legal layer that can be connected to any existing DeFi platform. Funds will always reach the right destination safely via Astra. If there is a malfunction, the team can resolve the issue and return the funds frictionlessly. Any problems can be solved amicably with the addition of a conflict clause – known as proof of trust – to the platform and smart contract.

This innovation is based on a Proof of Trust system, a built-in protection system that provides peace of mind in commercial transactions and contracts through an extra-judicial and extra-jurisdictional dispute resolution mechanism. The PoT mechanism helps to ensure that accidental or fraudulent transactions are addressed quickly, protecting stakeholders.

Matters such as the smart contract agreement in lending transactions or borrowing are therefore easily resolved because, at any time when one party is dissatisfied, this consensus mechanism can be invoked. There is a dispute resolution process included in all loan deals.

Conclusion

The current regulatory framework based on this traditional model will undoubtedly find ways to fit only awkwardly with a new scheme based on the absence of intermediaries. New forms of money and financial services will always cause some confusion at first. Astra will act as a cushion for regulation, compliance, and protection of DeFi users without sacrificing the benefits of decentralization.[/vc_column_text][/vc_column][/vc_row]

Astra Protocol Is Helping Decentralized Financial Organizations Ensure Regulatory Compliance

[vc_row][vc_column][vc_column_text]The meteoric rise of the DeFi and accompanying NFT space has been quite spectacular and truly unprecedented. In May 2021, the DeFi market reached an all-time high, with the total amount of digital currency locked surging to around $87 billion.

According to available data, the total value locked or TVL in DeFi almost reached $100 billion before a significant correction recently. This is a major milestone considering that the entire decentralized finance ecosystem was only valued at $1 billion in February 2020.

However, most great breakthroughs or innovations tend to come with some drawbacks. After all, nothing is perfect. This dramatic growth of DeFi along with the fact that these protocols are designed to be permissionless — meaning they can be accessed without ensuring regulatory compliance — makes it abundantly clear that DeFi could be exploited by bad actors or cybercriminals engaging in illicit activities.

Non-Compliance Fines on Financial Firms Surpassed $10 Billion in 2020

One of the main responsibilities for traditional banking institutions and other financial service providers is to ensure the markets’ integrity. Last year, a Fenergo report revealed that sanctions sustained by financial platforms for non-compliance with applicable AML/KYC and various other regulations totaled $10.6 billion internationally.

Updates to financial institutions’ regulatory guidelines to curb criminal activity have fallen short, according to industry analysts. But when comparing the traditional financial space with crypto and DeFi regulations, they’re still considerably more robust.

One of the primary challenges that DeFi and crypto-assets have to deal with is the extremely high profitability of the market to money-launders and those engaging in other forms of financial crime. Updates to crypto trading platforms can be challenging, as this would require costly  digital onboarding processes, user-developer friction, and susceptibility to major security breaches.

A 2020 study released by blockchain security company CypherTrace revealed that over 55% of all crypto trading platforms had extremely weak or no AML/KYC checks. This would be a critical building block in sufficiently secure and compliant solutions.

Ensuring Compliance with Innovative Legal Tech

The Astra Protocol enables DeFi platforms to adhere to the “inevitable” regulations “without compromise,” according to its developers.

As the crypto-assets market continues to attract more users, there will definitely be a need for better compliance solutions. The Astra Protocol team writes in a blog post that the route that the community can take is “through embracing appropriately tailored regulation procedures while maintaining its essential decentralized nature.”

The Astra team explains that decentralized financial organizations may use their protocol, as it can serve as the decentralized compliance layer “without requesting and storing KYC information themselves whilst simultaneously reducing the risk of fraud and criminal activity.”

The protocol’s developers claim that their solutions can effectively “unlock the door to institutional adoption.”

Regulators Have Increased Scrutiny of Crypto Firms

Federal regulators in the US such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have begun to seriously investigate the operations of cryptocurrency firms, especially those of digital assets exchanges. Given these developments, ensuring regulatory compliance needs to become a key priority for every financial institution.

Large crypto exchanges such as Binance, ByBit, BitMEX, Huobi, OKEx, among many others, have received multiple warnings from regulators not just in the US, but by regulatory agencies in almost every jurisdiction in the world.

It can be quite challenging to navigate the international regulatory landscape, especially with complicated requirements like the Travel Rule – which has introduced strict requirements that financial institutions must follow. They require service providers to accurately document and share the sender and recipient’s details for all major transactions (and many other guidelines).

Fortunately, the team at Astra Protocol has been developing solutions to help crypto firms remain compliant in this fast-evolving financial industry.Most industry experts agree that regulated platforms will provide sustainable business models, meanwhile, non-compliant service providers may be forced to shut down operations.[/vc_column_text][/vc_column][/vc_row]

Proof of Trust Discloses What Is Essential for the Validation of Smart Contracts

[vc_row][vc_column][vc_column_text]The use of smart contracts, which automates a democratized system of decision-making, is a common feature of every decentralized blockchain initiative. It is a necessary component of any decentralized system, including Defi, since it instills trust in the entire project, portraying it as a safe destination for investment.

Given the recent influx of new entries into the sector, as well as the corresponding number of departures, a blockchain project may require more than smart contracts to earn the trust of investors and stakeholders alike. So, what can be done that would make a difference?

One effective solution to the aforementioned is a patent. Unlike blockchain itself, which is an open-source technology that can’t always be patented, smart contracts create new written agreements suited to a specific project. As a result, patenting smart contracts is both ethical and practically essential for any blockchain project.

Proof of Trust is one of the very few in the industry that is seemingly aware and cautious of this fact, and as such does not neglect the role of patents as an integral part of the company’s end-to-end process.

The intellectual property of Proof of Trust is reported to number over 30 awarded patent claims, with all global patents issued by the United States Patent and Trademark Office, which should be sufficient in giving investors confidence in a project of any size.

In an exclusive interview with DailyCoin, Sakhib Waseem, CIO of Proof of Trust, discloses the essential role that patents play in the validation of smart contracts.[/vc_column_text][vc_column_text css_animation=”fadeIn” css=”.vc_custom_1630064051420{padding-top: 50px !important;padding-right: 50px !important;padding-bottom: 50px !important;padding-left: 50px !important;}”]

“The patents are for assurance and the validation of smart contracts, diagnostic of the programming language and the blockchain that it sits upon,”

[/vc_column_text][vc_column_text]Waseem noted.

As previously stated, smart contracts are used to automate a democratized system, and although this may not be sufficient to establish trust in the system, patenting serves as a validator for the overall protocol.

Waseem, fully aware that there are only a few companies that pay attention to patents, went on to make reference to the current state of the industry, and how it puts them in a “stronger position” when building a sustainable company.[/vc_column_text][vc_column_text css_animation=”fadeIn” css=”.vc_custom_1630064069100{padding-top: 50px !important;padding-right: 50px !important;padding-bottom: 50px !important;padding-left: 50px !important;}”]

“If we consider how the industry will expand, how it has evolved, and the relevance of smart contracts in this environment, being the primary executable layer for Defi, we are in a stronger position. It is as a result of this that we value our work so highly, and why we’re working hard to build a sustainable firm with high ambitions,”

[/vc_column_text][vc_column_text]Waseem explained.

According to Waseem, obtaining patents isn’t enough; there is also the need to get approval from an internationally recognized authority, even if it takes a long time.[/vc_column_text][vc_column_text css_animation=”fadeIn” css=”.vc_custom_1630064099034{padding-top: 50px !important;padding-right: 50px !important;padding-bottom: 50px !important;padding-left: 50px !important;}”]

“Even though we’ve worked on Proof of Trust for a long time, it’s a never-ending cycle. As a result, we will continue to work on it, driving more intriguing innovations within the application as it grows with time. This way, it doesn’t remain as a singular product, but one that is constantly evolving to ensure that it stays market-leading in what it does, and, of course, with a patent that is regularly updated,”

[/vc_column_text][vc_column_text]

Waseem said in conclusion.

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On The Flipside

• Filing for a patent takes a long time and the procedure as well can be very rigorous. On average, it takes between 12 to 22 months to get a patent approved.

• Most patents are granted for a limited period, generally for about 20 years or even less, after which it is made open-source.

• Bigger trust also means greater responsibility, for any project, especially having to put in extra effort and time.

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Why You Should Care?

There is an increasing rate of illicit activities carried out on the blockchain, and as such, it is of great importance to look out for other reasons to trust a project beyond incorporating smart contracts. In most cases, a patented project offers the reassurance that is needed to get involved.

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Astra Protocol, which Offers Legaltech for Crypto, Reports Significant Increase in DeFi Hacks, Fraudulent Activities

[vc_row][vc_column][vc_column_text]The team at Astra Protocol, which aims to equip the decentralized finance (DeFi) space with a complete legal layer and unlock the future growth of the industry, notes that operating within DeFi comes with “unpredictability” as well as key opportunities. Some of the main benefits of the underlying tech also pose certain challenges that have to addressed.

According to the Astra Protocol team, the DeFi market is evolving rapidly and malicious actors have been able “to anonymously exploit weaknesses in protocols to take vast amounts of money from unsuspecting individuals.”

Quite often there’s no recourse or route to justice for those impacted, the Astra Protocol team writes in a blog post. They also mentioned that with its rise in popularity in early 2020, the news that often accompanies DeFi involves hacks and various other types of exploits.

Last year, 17 major DeFi scams took place that “resulted in the loss of $154 million,” the update from Astra Protocol noted while adding that by the end of July 2021, DeFi hacks “made up 76% of crypto-related exploits and DeFi-related fraud made up 54% of major crypto fraud, up from just 3% in 2020.”

The recent news of the $600 million attack on Poly Network is a key example of “opportunistic” hackers “extracting what they can — likely making it the largest cyber-heist in crypto history,” the Astra Protocol team noted.

They added that this most recent attack “comes as losses from theft, hacks and fraud related to decentralized finance (DeFi) hit an all-time high.” These headlines will “not go unnoticed,” the Astra team noted while adding that they act as “a signal of uncertainty to potential investors in the sector as well as motivate law enforcement and financial authorities to intervene within the market.”

Just a week ago, yield optimization platform, Popsicle Finance had also become a target, with hackers “successfully drawing off around $20 million of Ethereum from the Sorbetto Fragola liquidity manager.” This attack was “bigger than all previous Decentralized Finance hacks in July combined,” the Astra Protocol developers noted.

They also mentioned that it seems the inherent risks were “too much to protect against in this case, with Popsicle Finance appearing to taking all the essential safeguarding steps having supported two different audits on the platform’s smart contracts — both revealing no concerns.”

As noted by Astra Protocol, the very complex administration of the hack “was later revealed to have taken advantage of a comparatively simple bug in the start contract code.”

As noted by its developers:[/vc_column_text][vc_column_text css_animation=”fadeIn” css=”.vc_custom_1629803395933{padding-top: 50px !important;padding-right: 50px !important;padding-bottom: 50px !important;padding-left: 50px !important;}”]

“Astra is the decentralized legal [tech platform] designed to protect all participants from such criminal attempts. Astra will bring trust to the DeFi market and reassure all users that their investments are wholly protected.”

[/vc_column_text][vc_column_text]They also mentioned:[/vc_column_text][vc_column_text css_animation=”fadeIn” css=”.vc_custom_1629803407686{padding-top: 50px !important;padding-right: 50px !important;padding-bottom: 50px !important;padding-left: 50px !important;}”]

“Should a party attempt to maliciously withdraw or siphon off a project’s funds, our patented protocol provides a route for funds to be retrieved. Our decentralized dispute resolution service quickly and cost-effectively resolves issues as soon as they arise, without the need to take the problem off-chain.”

[/vc_column_text][vc_column_text]With protection from Astra, DeFi and crypto-assets are “ready for institutional adoption,” the developers claim.[/vc_column_text][/vc_column][/vc_row]

Without a Dispute Resolution Mechanism, NFT Buyers Are Being Robbed in Plain Sight

[vc_row][vc_column][vc_column_text]The art industry is full of copycats and imposters. Anyone talented will attract positive and negative attention alike. Artists are no exception. The growing popularity of NFTs, or non-fungible tokens, has not necessarily made things better.

Imposters duping the fans of popular artists

Creators often come across some of their artwork tokenized on a blockchain and sold for big money by someone else. A very alarming situation, yet there is no immediate recourse for such nefarious practices.

The scenario above happened to Derek Laufman, a well-known artist. Although Laufman has never been involved in non-fungible tokens, some of his artwork was sold as NFTs through a popular marketplace. The seller of the NFTs made a fair bit of money from copying Laufman’s work yet never offered any explanation of compensation. When Laufman called it out on social media, the marketplace facilitating the sale removed the imposter’s account. It did nothing beyond that.

Unfortunately, people who bought the NFTs from Laufman’s imposter also got duped. They do not own any original artwork by Derek Laufman, as the NFTs were never legitimate.

Stories like this highlight the need for solutions capable of protecting buyers and artists alike. Those are hard to come by. But Astra protocol can offer a safety net for all parties involved, including the marketplaces.

Astra’s dispute resolution mechanism

Even with digital ownership of assets like NFTs, it can prove challenging for users to be 100% safe. The incident above illustrates that point rather well.

However, solutions like Astra protocol can be of tremendous value. At its core, the dispute resolution mechanism can help buyers recuperate their money from fraudulent activity such as impersonating an artist.

With Astra’s legal layer, it is possible for buyers and sellers to feel confident and safe during every transaction.

Buyers know they can get their money back if something doesn’t add up. Sellers know they must be honest, transparent, and on their best behavior at all times. Making it easier to open disputes brings more legitimacy to this industry and eliminates scammers, thieves, and other criminal activities.

As Astra protocol is compatible with all public blockchains, there is no reason for NFT marketplaces not to integrate this solution. In addition, Astra plugs into any existing platform and provides ways to restore funds in case of mishaps. All of this is possible thanks to the dispute resolution clause in smart contracts. It protects all parties and transactions at all times, making it easier to resolve any issues.

Closing Thoughts

It is wise for NFT buyers to see what form of protection a marketplace provides. If there is no protection whatsoever, it is best to look elsewhere. Any platform integrating Astra protocol will gain a competitive advantage in this booming industry segment. It is crucial to offer protection to buyers. After all, it seems relatively easy to impersonate an artist and sell their artwork as NFTs without their knowledge.

Getting banned from a platform is a small price to pay when one can make thousands of dollars without recourse. With the help of Astra protocol, buyers feel safe, and criminals have no shot at making any money. It is a win-win situation for all parties involved.[/vc_column_text][/vc_column][/vc_row]