DeFi needs to continually evolve like any other innovative technology in its early days. The immediate path for DeFi might be regarding its regulatory compliance. But applying regulatory compliance on DeFi might not be that easy, and it would be critical that such a solution would need to address any user privacy concerns as well.
SelfKey Credentials and What the Future Holds for DeFi
The future of DeFi could evolve into a regulatory compliant one. Since some of the current happenings on the DeFi space strongly point towards this. And SelfKey is trying to lead the way towards this future. Through the upcoming addition to the SelfKey Marketplace, the KeyFi platform, which rewards users with verified SelfKey Credentials.
Over the years, the crypto industry has produced a variety of products and tools, out of which only some have been successful both commercially as well as technically.
DeFi is one such product. And there aren’t many products, even from the traditional financial industry, that can replicate the commercial success that DeFi has experienced over the past year.
At this point in time, almost anyone remotely interested in crypto will have some idea about what DeFi is.
However, for those of you who still don’t, DeFi is a decentralized financial application that offers financial services or products such as lending, borrowing, or savings. These applications usually utilize smart contracts and web interfacing running on the Ethereum blockchain.
DeFi is arguably the first ecosystem to offer the types of financial services that have traditionally only been offered by centralized authorities such as banks and other financial institutions
To an extent, DeFi has been successful in boosting user participation in its services, which has been critical in expanding the decentralization of DeFi offerings.
The primary features of DeFi that have fueled its growth are:
- Ease of access to financial products and services.
- A welcome change from banks and financial institutions for financial services.
- Higher yields from an investment in DeFi compared to traditional investments.
These factors have been instrumental in increasing the commercial acceptance of DeFi and elevating it to its current status.
Evolution of DeFi
Currently, DeFi offers services around the world, unconstrained by borders. Moreover, any user can utilize these services without having to satisfy any particular eligibility criteria.
An ecosystem of financial services that is open to all is a very novel concept. However, no industry is free from scammers with criminal intent, and crypto or DeFi is no exception. These vulnerabilities were evident in the cases and scandals of DeFi platforms like Balancer, Bzx, among others.
Furthermore, decentralized exchanges (DEXes) have also seen a rise in interest alongside DeFi platforms. Many DEXes have been posting huge daily trading volumes, similar to their centralized counterparts.
However, as the basic design of a DeFi platform, as well as DEXes, is intended to preserve user privacy, tracing a transaction that has happened on these platforms back to a specific user is not easy. As a result, this in-built anonymity has been a boon for scammers and other malicious actors.
Nevertheless, these issues can serve more as opportunities to improve the ecosystem rather than as a factor that contributes to the downfall of DeFi.
One such improvement for the DeFi ecosystem would be regarding regulatory compliance. Regulations on DeFi protocols could be inevitable as the mainstream usage of DeFi becomes more and more prominent.
However, a regulatory framework at the expense of user privacy might not be an ideal solution as it could negatively impact several of the enticing features that DeFi offers as opposed to the traditional finance industry.
Thus, it could be safe to assume that a decentralized identity management solution that ensures compliance as well as user privacy could be the answer.
The SelfKey Identity Wallet is a free identity solution for Windows, Linux and Mac. Get yours today!
How does SelfKey fit into DeFi?
The KeyFi platform is an AI-powered DeFi aggregator platform that rewards users who hold verified SelfKey Credentials.
Users receive their Credentials through a user verification process through the SelfKey Identity Wallet. The SelfKey platform offers a user-centric and privacy-preserving solution that equips users with complete control over their personal data.
With the introduction of Credentials, SelfKey aims to nudge the DeFi ecosystem in its path towards potential regulatory compliance.
Hence, during a time when user privacy is starting to receive better attention, SelfKey is poised to play a critical role in shaping the future of DeFi.
As a nascent financial ecosystem, it is normal for DeFi to undergo many changes that will ultimately shape it into a mature ecosystem.
Given the issues that currently affect DeFi, it may be safe to say that the immediate path of the DeFi evolution will be in the direction of regulatory compliance, which will help prevent people with criminal intent from abusing DeFi platforms for nefarious purposes.
However, for DeFi, user privacy is just as important of a factor as regulatory compliance.
Thus it will be crucial for the potential solution to strike a balance between user privacy and regulatory compliance.
The upcoming KeyFi platform backed by SelfKey Credentials may help Selfkey to lead the push on self-regulation from the DeFi industry through a proactive regulatory compliance approach, and in the process, prepare the DeFi ecosystem to evolve into a regulatory compliant industry.