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Flare Network, a data-centric layer 1 blockchain, announced its partnership with aiPX Finance to launch a decentralized non-custodial perpetual exchange on the blockchain. The DEX allows traders to deposit their assets into smart contracts, eliminating the need for a third party to enhance direct trading. Following the launch, users on Flare can leverage their trade positions by up to 30x, enhancing the liquidity provision for users.

aiPX Finance is a fork of Level Finance, an iteration of the perpetual derivatives trading protocol GMX. The latest partnership with Flare aims at broadening decentralized trading on the blockchain. According to its website, aiPX provides a cutting-edge platform focusing on risk management and innovative solutions for liquidity providers.

The exchange will benefit from the Flare Time Series Oracle (FTSO), which delivers highly-decentralized price and data feeds to Dapps on Flare without relying on centralized providers. The data feeds will be used to calculate collateral calculations and liquidation thresholds.

Flares commitment to decentralization through the Flare Time Series Oracle and to breaking down and eliminating traditional barriers to quality data via innovations like the State Connector make building on Flare a no-brainer for us, said Sonic, CEO and Cofounder of aiPX. Flare highlights whats important in pushing the adoption of decentralized products forward, and were excited to innovate alongside their accomplished team.

At first, the blockchain-powered exchange will introduce three decentralized liquidity pools WUSDC, WFLR, and WUSDT with a roadmap to incorporate additional pools and token pairs as time progresses. Beyond facilitating perpetual derivatives, the platform will empower users with blockchain-enabled leverage trading, seamless token swaps, staking opportunities for protocol revenue participation, and inclusive user governance.

aiPX is a very welcome addition to the growing Flare DeFi ecosystem, Flare CEO and Cofounder Hugo Philion said. They are a strong development team, and we share their commitment to developing products that are decentralized and non-custodial, showing just what is possible in this space.

Having previously launched the Takepile DEX on the Fantom network, the latest move on Flare aims to foster a seamless trading experience directly from users wallets, the team statement concludes.

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Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basics opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.

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Layer 1 Blockchain Flare Introduces Perpetual Contracts In ... - The Crypto Basic

(Kitco News) - Institutional investment into digital assets is once again on the rise thanks in part to the filing of an application for a spot Bitcoin (BTC) exchange-traded fund (ETF) by BlackRock, the worlds largest asset manager and it's not just specific cryptocurrencies that are garnering attention as blockchain technology is also being used to launch regulated investment products around the world.

A recent example of this is the Tel Aviv Stock Exchanges (TASE) Project Eden, which successfully issued a dummy digital governmental bond on a blockchain-based platform as an ERC-1155 security token using a dedicated decentralized app (dApp).

While this event marks a significant development in the digital bond space, Ralf Kubli, a board member of the Casper Association, said this is simply a veneer of innovation and potential the catalyst to spark the next financial meltdown.

Kubli sat down for an interview with Kitco Crypto to elaborate on this perspective and provide insight into where the future of blockchain-based investment products is headed.

According to Kubli, Current tokenization methods simply digitize the asset, not the liabilities or cash flows. In other words, an asset-backed token gets created and appended to a blockchain with a PDF of the Terms and Conditions attached. This means that tokenized assets, designed to be more efficient and automated, still require human intervention, which can introduce errors and discrepancies.

Kubli noted that A similar lack of transparency and verifiability around cash flows was one of the primary triggers of the 2008 banking crisis.

Diving into the concept of tokenization, Kubli said the terminology being used is not really correct due to the nature of financial assets vs. real-world tokenization. You can tokenize a financial asset because a financial asset is digital in its form, they are digital innate. When people talk about real-world tokenization, dealing with physical assets such as a house or car, they can only be represented on-chain, which poses a problem as it requires a verified link between what you are representing on-chain and what exists off-chain.

Kubli said one of the reasons he is so passionate about financial assets is because they are truly digital. These days we are hardly ever paid coupon payments in cash anymore; its all digital. Thats why Im so passionate about it. And the problem with these tokenization efforts in financial markets is that they are not digitizing the financial instrument; they are merely digitizing the form of the financial instrument and defining the obligations of the parties in the instrument. Not necessarily digitally, and certainly not with an algorithm.

Referring back to the digital bond released by TASE, Kubli said, a bond pays interest over time, so you need to define how this is calculated. If you dont actually have this logic in the token you basically only have a dumb token. So you just have a token that says, Hey, Im a bond, but if you want to know how much money that youre owed, please go and read the PDF, which is hashed inside my contract.

Thats not very efficient and it will basically not lead to anymore transparency, he said. It will not lead to more efficient markets, it will not lead to more liquidity.

This is where the concept of smart financial contracts comes into play.

You take the financial contract, which defines clearly the obligations of the parties to the contract, and then we combine it with blockchain to make a smart financial contract.

Approaching it in this manner aligns with computer scientist Nick Szabos definition of a smart contract, which is that it is observable, verifiable, enforceable, and has privacy, he said.

Integrating smart financial contracts

To help build out the smart financial contract ecosystem, Kubli has been working with the Casper Association and the Algorithmic Contract Types Universal Standards (ACTUS) Research Foundation to build out a Tokenization as a Service (TaaS) solution that translates financial instrument data into standardized Smart Financial Contracts on the Casper blockchain.

ACTUS was established in the wake of the 2008 financial crisis to create clarity around the cash-flow patterns of financial instruments that were based on collateralization.

The TaaS solution is an open-source standard that any business can use. It enables the creation of native financial digital assets that are machine-readable and executable, allowing for faster trading and settlement. Algorithmic logic is also tied to the underlying digital asset, which makes it possible to analyze, organize and automate information about any aspect of the financial instrument.

Kubli noted that while they have implemented some of these smart financial contracts on Casper, the solution is chain agnostic, which means that institutions can use it to launch contracts on any blockchain network.

He added that this system can be used in both cash flow-based environments as well as commodity-based environments, and both will benefit from the tokenization of these contracts. This aligns with the discussion that Kitco Crypto had with Ingo Rube at Kilt about the concept of applying digital identities to commodities to enable them to be recorded, tracked, and traded on the blockchain.

Once these assets are given digital identities on the blockchain, you can build financial instruments on top of it, Kubli said. Its a lot easier; its standardized. It lets you reap the benefits of blockchain which is efficiency in mid-office and back-office operations.

One company that has already implemented a similar solution in the precious metals market is aXedras, a Swiss-based distributed ledger technology (DLT) infrastructure and application provider digitizing the precious metal value chain, from miner to investor. They are really far ahead in the bullion market, Kubli said.

The importance of transparency

The main idea behind what Kubli is helping to develop is a way to provide a clear definition of an asset's cash flows on-chain. While you cant make calculations or computations on-chain due to costs, you can represent a computation of the instrument on-chain, and then when you look at the instrument on-chain, at any given time, you can see whether you have paid any monies due and can see what the future obligations are, he said.

This can be combined with concepts like zero-knowledge proofs that will allow you to hide the positions you hold, he added.

Kubli called this type of solution a precondition to efficiency. If you just have multiple random programmers programming bonds in their own ways, at some point you will have all these representations of bonds living on these new rails, but then the complexity of what it is that I am looking at has just increased even more.

One of the best applications of this solution is decentralized finance (DeFi), he said, because DeFi is mainly just over-collateralized lending currently, but with the introduction of smart financial contracts that can deal with cash flows over time, you can have real financial instruments live in DeFi environments.

DeFi and TradFi are both finance, the only difference is the counterparty, he said. You have a centralized counterparty, you have no protocol, and you have people that assert that what they are doing is correct, even though many times theyre not. In order for DeFi to scale beyond overcollateralized lending, as you have on AAVE, you need smart financial contracts that live in the DeFi environment.

When it comes to applying the solution in TradFi, Kubli said they are currently in talks with five investment banks in Europe on the integration of the new smart financial contract system and have also had some preliminary discussions with Citibank in the U.S.

Regulatory developments

On the topic of the recent passage of the Markets in Crypto Assets (MiCA) bill in the EU, Kubli said that it is a good starting point for a regulatory framework that people can build from. That being said, he also suggested that developers shouldnt sit around waiting for global regulations, they have to innovate.

As for the effects the solution could have on global financial markets, Kubli said that the situation at FTX could have been avoided if we had smart financial contracts because we would have seen the positions that they were building and would have known that it wasnt sustainable. The same is true for the collapse of Terra/Luna. It was clear in the code that once it reversed, it was infinite dilution, and it was right there in the code.

The standard we are building was the result of the 2008 financial crisis, Kubli said. This standard is about having transparency, which helps provide a better understanding of the waterfalls of cash flows and all the obligations that are inside a token in a machine-readable and machine-executable fashion. Thats the key. There's going to be zero adoption unless you have that logic inside the tokens.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Tokenization 2.0: How smart financial contracts are revolutionizing ... - Kitco NEWS

Description

Decentralized Finance, or DeFi, has rapidly emerged as a disruptive force within the global financial system. And while much of the attention has been focused on Ethereums DeFi ecosystem, Bitcoin has begun to make its mark in the DeFi space, bringing with it unparalleled security, decentralization, and immutability. Welcome to our exploration of the Bitcoin Read more

Decentralized Finance, or DeFi, has rapidly emerged as a disruptive force within the global financial system. And while much of the attention has been focused on Ethereums DeFi ecosystem, Bitcoin has begun to make its mark in the DeFi space, bringing with it unparalleled security, decentralization, and immutability. Welcome to our exploration of the Bitcoin DeFi ecosystem.

As we embark on this journey, we will unearth the intricacies of this revolutionary technology, understand its potential, uncover its use cases, and highlight the challenges it needs to overcome to reach full maturity. Lets delve deep into the Bitcoin DeFi ecosystem, exploring how it is set to reshape the financial landscape.

Decentralized Finance, better known as DeFi, refers to a transformative set of blockchain-based tools, applications, and infrastructures that facilitate financial operations beyond the realm of conventional financial systems.

DeFi applications are remarkable for their operation without a central governing body or intermediary to orchestrate transactions. Instead, they operate independently, guided by protocols encoded directly onto the blockchain.

Eschewing intermediaries, DeFi offers a compelling alternative to traditional finance (often referred to as CeFi). The advantages are manifold:

Programmability: Leveraging the power of smart contracts, transactions in DeFi can be automatically and instantly executed. Additionally, it empowers developers to craft novel financial services and digital assets.

Transparency: Every transaction is eternally recorded and publicly accessible, with verification carried out by network users. Also, the open-source nature of many DeFi projects promotes transparency, as any individual can view, scrutinize, and audit their codes.

Accessibility: DeFi gives users unmediated access and control over their assets, bypassing the need for a bank. This dramatically lowers entry barriers, making financial services accessible to unbanked populations globally.

Borderless Operations: DeFi is universally accessible, unconstrained by geographical boundaries and local legal systems. It treats international and local transactions equally, allowing users to transact freely with each other on the blockchain.

In the realm of financial innovation, decentralized finance, known as DeFi, and Bitcoin have sparked significant change. Both represent a seismic shift from the traditional financial system, favoring an open, permissionless approach. When we examine the intersection of Bitcoin and DeFi, we observe an intriguing convergence of ideologies and technologies.

Bitcoin represents a decentralized alternative to fiat currencies. Its objective is to provide a peer-to-peer system for online transactions that does not require trust in any central authority. In contrast, DeFi extends this decentralization ethos to a broader range of financial applications. It aims to create an open financial system where services like lending, borrowing, and trading are accessible to anyone, anywhere, without the need for intermediaries like banks.

The evolution of Bitcoin DeFi bridges traditional finance and DeFi by leveraging Bitcoins network and its inherent properties of decentralization, security, and transparency. Through sidechains and interoperable platforms, Bitcoins liquidity can be brought into the DeFi world, allowing for financial applications to be built around the worlds first cryptocurrency.

The foundational layer of Bitcoin is pristinely uncomplicated, a design choice that affords it unmatched security, decentralization, and resistance to censorship. Nevertheless, this simplicity implies a relative lack of functionality, particularly when compared with other blockchains that offer full smart contract programminga key requirement for decentralized applications (dApps).

Smart contracts enable the direct exchange of value between parties, eliminating the need for a third party. It ensures each transactions transparency, authenticity, and trustlessness. Once executed, smart contracts are inscribed onto the blockchain, leaving an indelible record accessible to all.

However, Bitcoins core features dont preclude its participation in DeFi. On the contrary, Bitcoins solid fundamentals position it as the most reliable settlement layer for smart contracts.

The recent surge of innovations has provided ways to construct applications, technologies, and infrastructures atop the Bitcoin blockchain. This has been facilitated by layers, protocols that enhance Bitcoins functionality and scalability. Four such layers are primarily involved in Bitcoin DeFi, each unique in its relation to Bitcoins base and the added utility it imparts.

The Lightning Network is a layer 2 scaling solution for quick, secure, and inexpensive peer-to-peer transactions. It forms channels between two parties to facilitate off-chain transactions, reducing the load on Bitcoins base layer and thereby bolstering the scalability of Bitcoin payments.

Stacks is a Bitcoin-compatible smart contract platform. Its Proof-of-Transfer mechanism ensures the automatic settlement of Stacks transactions on Bitcoin at every block. Stacks smart contracts can monitor and respond to Bitcoin transactions, tightly linking the two blockchains.

DeFi projects on Stacks cover a range of applications, including decentralized exchanges, asset management, lending, atomic swaps, and stablecoins.

Rootstock (RSK) is a Bitcoin sidechain compatible with the Ethereum Virtual Machine (EVM). It integrates Ethereum-based applications with Bitcoin using a merged mining process, mining RSK and Bitcoin blocks simultaneously. Transferring funds to RSK is facilitated through Powpeg, a two-way bridge that converts BTC to RSKs native asset, smartBTC (RBTC).

RSKs DeFi ecosystem encompasses wallets, asset swaps, lending protocols, trading platforms, stablecoins, bridges, and more.

The Liquid Network is a Bitcoin layer aimed at confidential transactions and asset issuance. Its mission is to replace reliance on traditional financial systems, intermediaries, and custodians with trustless, self-custody solutions.

The Liquid Network allows users to transact BTC with enhanced privacy. Users can also develop their own Bitcoin DeFi projects, offering security tokens, trustless swaps, private peer-to-peer payments, and more.

Bitcoin, the gold standard of cryptocurrencies, and DeFi, the cutting-edge innovation in financial technology, are undeniably transformative in their respective domains. Their intersection, Bitcoin DeFi, carries the potential to revolutionize how we perceive and engage with financial systems.

However, like all burgeoning technologies, Bitcoin DeFi is not without its challenges. The following section aims to elucidate some of the prominent hurdles faced by Bitcoin DeFi and proposes possible solutions to navigate these issues effectively.

Challenge: One of the most pressing issues in Bitcoin DeFi is scalability. The Bitcoin network can process a limited number of transactions per second (TPS), which creates bottlenecks during peak transaction periods.

Solution: Layer 2 solutions like the Lightning Network can help overcome this challenge by moving transactions off the main Bitcoin blockchain, thus enabling faster and cheaper transactions. This scalability solution may hold the key to facilitating high-volume activities in Bitcoin DeFi.

Challenge: Bitcoins blockchain was not designed to interact with other blockchains natively. This lack of interoperability is a challenge for Bitcoin DeFi, as it limits Bitcoins interaction with other DeFi ecosystems.

Solution: Cross-chain bridges and wrapped tokens, such as Wrapped Bitcoin (WBTC) on the Ethereum blockchain, can mitigate this issue. These technologies allow Bitcoin to interact with other blockchains, enabling more vibrant and diverse DeFi applications.

Challenge: Unlike Ethereum, Bitcoin was not initially designed to support complex smart contracts, the backbone of DeFi applications.

Solution: The introduction of side chains like RSK (Rootstock) has provided Bitcoin with the ability to support smart contracts. These sidechains enhance Bitcoins functionality without compromising its security, allowing for more advanced DeFi applications.

Challenge: The regulatory landscape for cryptocurrencies and DeFi is still uncertain in many jurisdictions. This lack of clarity may deter some users and institutions from engaging with Bitcoin DeFi.

Solution: Continued dialogue and cooperation between blockchain organizations, DeFi projects, and regulators are crucial. As regulatory frameworks become clearer and more refined, Bitcoin DeFi is likely to see increased adoption and legitimacy.

Challenge: Security is a paramount concern in Bitcoin DeFi. The risk of smart contract bugs, hacks, and other vulnerabilities is a serious issue for users and developers alike.

Solution: Ongoing advancements in auditing and formal verification of smart contracts, coupled with improved standards for code development and review, can significantly reduce these risks. User education on security practices can also play a crucial role in mitigating such threats.

Bitcoin DeFi has heralded a new era of financial utility, anchored by the principles of trustlessness, transparency, and unassailable immutability.

Here, we explore the myriad possibilities unlocked by decentralized finance on the Bitcoin network.

Self-custody allows users to take charge of their digital assets, granting them exclusive access to account passwords, private keys, and seed phrases. Bitcoin wallets offer a streamlined method for managing funds.

Wallets connected to the internet, known as hot wallets, facilitate seamless buying, selling, and transferring of funds, and are essential for interfacing with Bitcoin DeFi applications. Cold wallets, physical devices that store digital assets offline, offer enhanced security against potential cyber threats.

Bitcoin layers empower anyone to issue their own token. The range of applications for such tokens is wide, encompassing stablecoins, tokenized bitcoins, security tokens, digital collectibles, rewards, and vouchers.

Atomic swaps facilitate direct cryptocurrency trades between two different blockchains, allowing users to tap into new ecosystems with unique platforms and applications.

DeFi platforms enable peer-to-peer Bitcoin lending and borrowing. Borrowers can secure crypto loans without intermediaries, typically for trading or arbitrage. Such applications hinge on smart contracts for transaction facilitation and thus necessitate the use of Bitcoin layers like Stacks, RSK, and Liquid.

For lenders, depositing crypto assets can generate passive income via yield. This popular method allows users to earn interest on their idle BTC. Interest rates fluctuate based on the DeFi platform, loan term, and loan amount.

Derivatives allow two parties to commit to buying or selling an underlying asset. Futures, options, and perpetual contracts rank among the most popular forms of derivatives.

Decentralized exchanges enable peer-to-peer digital asset trading without a central authority. Owing to their reliance on complex smart contracts for autonomous operation, Bitcoin DEXs must be built on layers, such as Stacks.

DAOs are community-led entities operating without a central authority, with governance vested in members. Frequently employed in DeFi applications, members can vote on protocol updates and the handling of DAO funds. DAOs currently exist on Stacks and RSK.

Bitcoin DeFi represents a new frontier in finance, challenging traditional financial institutions by introducing unprecedented transparency, accessibility, and programmability into financial transactions. As weve discovered in this journey through the Bitcoin DeFi ecosystem, Bitcoin not only has the potential to stand on par with other DeFi platforms, but it could possibly redefine the very essence of finance.

From atomic swaps and DAOs to lending and borrowing, the use cases are numerous and powerful. Yet, like any emerging technology, it also faces a slew of challenges. As we watch this ecosystem continue to evolve and mature, one thing is clear: Bitcoin DeFi isnt just a trend, but a testament to the transformative potential of blockchain technology in finance.

Bitcoin DeFi provides an additional layer of privacy for transactions. It allows users to transact BTC with enhanced privacy measures, making transactions less traceable and more confidential.

As of now, Bitcoin DeFi operates in a largely unregulated space. However, as the industry grows, it's expected that regulatory authorities will introduce guidelines and regulations to ensure transparency and protect users.

Yes, like all financial systems, Bitcoin DeFi has its risks, including smart contract vulnerabilities, regulatory risks, and the volatility of cryptocurrencies. Users should be careful and conduct thorough research before interacting with DeFi platforms.

Bitcoin DeFi reduces barriers to financial services, allowing anyone with an internet connection to participate in global finance. This can bring financial services to unbanked populations around the world.

No, Bitcoin DeFi relies on internet connectivity for transactions and interactions with the blockchain. However, efforts are ongoing to create solutions that can enable basic transactions without internet access.

In Bitcoin DeFi, transactions are immutable and irreversible once they're verified and added to the blockchain. Disputes are less common because of the transparency and security of the network.

Most Bitcoin DeFi applications use Solidity or other Ethereum-compatible languages, especially on platforms like RSK that are EVM-compatible. Other Bitcoin layers may use different languages.

Bitcoin DeFi is as secure as the layers and smart contracts it is built upon. Bitcoin's underlying blockchain is considered highly secure due to its decentralized and immutable nature.

Yes, anyone with the necessary technical knowledge can create a DeFi application on Bitcoin. However, creating a secure and efficient application requires significant expertise in blockchain technology and smart contract programming.

Yes, Bitcoin DeFi can be an effective tool for remittances, allowing users to send money across borders quickly, securely, and with lower fees than traditional remittance channels.

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Can the Disruptive Bitcoin DeFi Ecosystem Help Reshape Finance ... - Cryptopolitan

To help businesses navigate the complex world of cryptocurrency transactions, we asked six industry experts to share their insights on common legal issues and how to protect against them. From sanctions violations to data breaches, these co-founders, CEOs, and other professionals provide valuable advice on safeguarding your business in the ever-evolving crypto landscape.

One of the serious risks people run into using crypto transactions is violating sanctions. Sanctions refer to U.S. laws prohibiting people from doing business with individuals such as terrorists, drug cartels, and war criminals.

When using fiat currency, companies dont worry about sanctions much, as anyone on a sanctioned list wont have access to a central bank or credit card. Banks perform due diligence on customers to ensure theyre not serving sanctioned individuals. As a result, the fiat financial system has already weeded out most sanctioned individuals.

When operating a business that accepts cryptocurrency, you run the risk of doing business with a sanctioned individual, which could get you into trouble even if you dont realize youre doing business with a sanctioned individual.

To mitigate this risk, crypto companies should employ a due diligence firm offering screening services to check crypto wallets for associations to sanctioned individuals before transactions are made.

A key hurdle for cryptocurrency transactions is adherence to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. Given their capacity for anonymity or pseudonymity, digital currencies can be manipulated for unlawful actions like money laundering.

This has prompted rigorous AML and KYC rules across various regions, compelling enterprises involved with digital currencies to authenticate their clients identities and scrutinize dealings for any dubious activities. Non-adherence could lead to substantial monetary penalties and legal repercussions.

Enterprises ought to enforce robust AML and KYC protocols, encompassing the validation of client identities, and the investigation of suspicious activities. As the cryptocurrency industrys regulations change, it is the responsibility of every related business to stay up to date. This will benefit both the customers and the businesses in the long run, through existing legal frameworks.

Smart contract disputes can be a common legal issue in cryptocurrency transactions. To protect themselves, businesses can carefully draft and test their smart contracts and include dispute resolution mechanisms.

For example, they can include an arbitration clause in their contracts, which specifies the rules and procedures for resolving disputes. They can also appoint a neutral third party to act as an arbitrator. By doing so, businesses can reduce the risk of legal disputes and ensure that their contracts are legally enforceable.

Cryptocurrency is a relatively new technology, and as a result, there is still a lot of uncertainty about how it is regulated. This can create legal risks for businesses that accept cryptocurrency payments. For example, businesses may be held liable if they facilitate transactions that are used for illegal activities.

Before you start accepting cryptocurrency payments, it is important to do your research and understand the legal landscape. This includes understanding the laws in your jurisdiction and the risks involved in accepting cryptocurrency payments.

Also, get legal advice. If you are still unsure about the legal risks involved in accepting cryptocurrency payments, it is a good idea to get legal advice from an attorney who specializes in cryptocurrency law.

One common legal issue that arises with cryptocurrency transactions is data breaches, which can lead to lawsuits and regulatory penalties. To protect themselves, businesses can implement strong privacy measures, such as encryption and multi-factor authentication, to ensure that sensitive customer information is not compromised.

For example, Coinbase, a leading cryptocurrency exchange, employs various security measures to protect user privacy, including the use of crypto hardware wallets and biometric authentication. By prioritizing privacy, businesses can avoid legal issues and maintain customer trust.

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What Are Some Legal Issues to Watch Out for When Working With ... - Block Telegraph

Neutron, launched as a cutting-edge interchain technology, is envisioning to grow within the Cosmos ecosystem. In May, Neutron underwent an on-chain vote in favor of its launch on the Cosmos network.

Neutron became the first smart contract platform on the Cosmos network. The consumer chain based on Replicated Security (RS) has had a lot happening within two months of its launch.

As the newly launched chain celebrates its first milestones, BeInCrypto got a chance to speak with the general manager of Neutron. Avril Dutheil is an entrepreneur and investor in various blockchain projects, including Ethereum and Polkadot.

He provided us with some insight into Neutrons next objectives and latest initiatives.

Neutron recently launched an AEZ Accelerator & Builders Fellowship program in partnership with ATOM Accelerator and LongHashX. The 12-week program promises to support early-stage applications built on Neutron and Cosmos Partner Chains. It includes providing builders with the necessary funding and networking opportunities.

According to Dutheil, the accelerator program serves two primary objectives. Firstly, it aims to enhance the quality and usability of applications within the Neutron ecosystem. This makes it easier for developers to create secure and efficient dApps. Secondly, as a consumer chain closely associated with the Cosmos Hub, Neutron envisions a collaborative trade zone within the Atom Economic Zone.

The executive emphasized that the accelerator program aims to foster privileged integrations, collaborations, and relationships among Cosmos Hub and consumer chain projects.

Dutheil also tells us that the accelerator program will initially fund five teams of builders working on the Neutron network. He explains that the program offers funding and ensures participants are ready to successfully launch their applications in the market.

Meanwhile, Binance Labs and CoinFund co-led a $10 million funding round for Neutron weeks after it went live on the mainnet.

Neutron is also looking to build a team of its own with the recent funding round. The developer earmarked $10 million to ensure the platforms ecosystem thrives and the development of the protocol remains independent of a single team.

He also underlined a significant need for stability on Neutron as teams commit to developing the protocol in the coming years. Dutheil told us,

The money is a resource that well be using in order to ensure that the design itself gets developed and improved over time, as much as possible and in a decentralized manner.

He also highlighted that Neutrons smart contract project could distribute voting power and liquidity on the platform without human intervention. In this regard, the executive said, I think it is pretty interesting. It made Neutron one of the most liquid assets and one of the most liquid chains in the ecosystem from day one.

This achievement positioned Neutron as one of the most liquid chains in the ecosystem from its inception. Although the number of applications on Neutron is still growing, Dutheil signaled the emergence of compelling DeFi possibilities.

According to DeFiLlama, Neutron is the seventh largest chain on Cosmos while housing one protocol. At press time, it has over $21.35 million in dollars locked. Cronos, Kava, and Osmosis remain the top three chains on the network by total value locked (TVL).

However, the figures alone dont ensure Neutrons profitability and, in turn, its sustainability.

Dutheil underlined that Neutrons scalability and profit generation as a smart contract platform is closely tied to its ability to become a more useful and appealing platform within the Cosmos ecosystem. But the platforms setup does help it to generate revenue.

While Dutheil says that the design makes Neutron profitable, it also puts significant effort into building a robust ecosystem to support successful applications.

In contrast to Osmosis success on Cosmos, Dutheil believes its profitability is limited due to the current economics of its token. He compared its liquidity incentives and staking rewards to Neutrons model, which does not involve token inflation for staking rewards.

He noted, Basically, there are no tokens being minted and spent on these staking rewards from Neutron. Therefore, validators share in the revenue generated by Neutron makes it more sustainable.

Dutheil explains,

One thing thats pretty interesting about Neutron is that due to Replicated Security, the protocol doesnt have a fixed cost. The protocol doesnt produce money over time. It can only earn money through transaction fees and MeV (Maximum Extractable Value) and other value capture mechanisms. And that value is then shared with the Cosmos Hub.

Detailing how Neutrons model works, Avril explained that the Cosmos Hub (provider chain) enters into an agreement with Neutron (consumer chain). This is where the Cosmos Hub lends its stake and validator set to Neutron in exchange for 25% of the revenue generated by Neutron, the entrepreneur explained.

He reiterated, Neutron is unlikely to be displaced from being the smart contract platform that the Cosmos Hub secures because, one, theres no point for the hub to have two platforms doing the same thing.

While he doesnt see smart contract launches on RS in the near future, Neutron is targeting collaboration over competition. Dutheil said,

I dont think Neutron is threatened at all. In terms of like the wider security, like shared security models that are coming to life in the industry, Neutron can actually work with a lot of them.

For instance, Dutheil cited that Neutron is compatible with Mesh Security. He explained that Neutron DAO could allow alternative mechanisms to use a portion of its treasury to provide security to other chains and earn staking rewards from them while creating mutually beneficial relationships.

Regarding other security mechanisms like Ethereum or staking, Avril highlighted the need for Cosmos to differentiate itself. He pointed out that Cosmos has to bring unique ideas to the market to avoid competition from Ethereum variants. He stated,

I think that just boils down to the point of, weve made really powerful ideas and technologies in this ecosystemAnd thats one of the things that were trying to do with Neutron right.

Dutheil noted that Neutron aims to allow building applications without reinventing the wheel. While its security model and focus on new applications position it well in the interchain smart contract space, can it move beyond DeFi to unlock its potential?

In response to the question about Neutrons plans to extend its use case beyond decentralized finance (DeFi), Dutheil mentioned that its important for Neutron to evaluate its value proposition.

He said,

We should approach what vertical we tried to serve. Lets look at what we have and which types of applications are right. And if we want to expand into a new category, then we need to make sure that our value proposition actually fits this right.

Dutheil emphasized that Neutrons current strength lies in its security and the ability to perform cross-chain operations, making it suitable for DeFi applications. However, he noted other verticals, such as gaming, have different requirements and may prioritize performance over cross-chain functionality.

Highlighting further that if Neutron intends to expand into these verticals, it needs to ensure that its technology can meet the specific needs of those applications.

The executive also mentioned an interesting idea for the future of Neutron, which involves implementing application-specific rollups. By pursuing this direction, Dutheil sees Neutron catering to new verticals, like gaming.

Notably, the crypto sector is struggling with the FTX collapse, a nail in the bear market. According to PitchBook data, private funding for crypto startups reached its lowest level in Q1 2023 since 2020.

The research also found that VC funding for the industry decreased by 80% compared to last years period, falling to $2.4 billion.

While that happens, Dutheil mentions that the crypto market is currently facing challenges. However, he believes that what truly matters is building technologies superior to existing systems. And therefore, creating applications that genuinely serve users needs.

The future of interchain smart contracts holds immense potential in how decentralized applications interact and operate. Meanwhile, seamless interoperability has been a central theme of the market for a few years.

While that happens, Neutrons general manager said he prioritizes three things building a very strong, very decentralized, very coordinated ecosystem that drives itself forward over time.

Following the Trust Project guidelines, this feature article presents opinions and perspectives from industry experts or individuals. BeInCrypto is dedicated to transparent reporting, but the views expressed in this article do not necessarily reflect those of BeInCrypto or its staff. Readers should verify information independently and consult with a professional before making decisions based on this content.

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Will Neutron Rise to Be the Top Star in the Cosmos Ecosystem? - BeInCrypto