On 22 April, MakerDAO, known as the ‘central bank’ of the DeFi world, completed the first real-world asset loan in Defi (decentralized finance), in partnership with financial supply chain project Centrifuge. Centrifuge in its Centrifuge Tinlake Protocol helped New Silver, a loan pool, to set up real estate repayment and transfer loan pools. He has financed his first loan using MakerDAO as a credit facility.
This is a major success and milestone for Daffy. With the help of DIFI, real-world financial institutions can work 24 hours on smart contracts without any trust issues, and can offer low interest rates on loans and get instant liquidity with minimal capital costs. This opens the door to a new trillion-dollar market for Defy.
DeFi is widely regarded as the second large-scale application of blockchain, which has attracted the attention of mainstream financial institutions. Bank of America previously released a report stating that it is more optimistic about Ethereum than Bitcoin due to the existence of Defy.
However, DeFi in its current form is not yet ready for traditional finance. As an example, take Ethereum, the most widely adopted project of the Daffy ecosystem. Disadvantages such as high transaction fees, performance inefficiencies and lack of privacy protection are still very high.
Privacy protection becomes a hindrance in the development of Defy
Privacy protection is a major obstacle, but it also provides a good opportunity for Defy. Traditional investors, institutions and banks attach great importance to the protection of privacy. It is hard to imagine that they would place their property on a fully open platform.
Privacy protection can make DeFi lending more widely applicable and get credit lending on the chain faster. Current DIFI lending is typically over-collateralized, as there is not enough information about users. If confidentiality can be protected, users can provide sensitive data, such as financial data and other behavioral data, to generate without revealing their own credit evaluation openly. The calculated credit can be used to provide credit loans to users.
Privacy protection can also better protect investors from attackers. Currently, all information on the DeFi protocol is public. Everyone can see what the user wants to do, so can the attacker. Many attackers will use this information to attack users for profit. If the transaction information of the users is protected, they will not be attacked or mediated.
Current status of blockchain privacy protection
As a financial application, it is imperative for DIFIs to strengthen their privacy protections. Only in this way can DIFI be more secure and reach a wider market in the real world.
There are already privacy-focused solutions on blockchain, such as cryptocurrency Zcash, centralized ‘The coin Service providers such as MixerTombler and Bestmixer.io, and decentralized ‘The coin Mixing ‘protocol tornado cache, among others.
However, centralized The coin Mixing services are prone to security issues. The coin Mixing technology can largely prevent leakage of transaction information on the blockchain, but there are still some efficiency bottlenecks and security risks. Furthermore, it does not support customized programming, which means that it cannot support secondary functions.
The problem with cryptocurrency and privacy public chains is that they are unable to increase support for smart contracts while ensuring private transactions. Acaden has tried to do this on the basis of Oasis Labs, but due to its immature products and lack of adequate developer support, it is difficult for them to make a strong impact.
The Secret Network is currently building a privacy computing model in common smart contracts. However, only on-chain exchanges have been published, and liquidity is very poor. In addition, the Secret Network needs to use Rust for development, while only a few are Rust developers, and they are primarily focused on the Polkadot ecosystem.
The above projects also face other shared problems such as poor on-chain ecosystem design and cross-chain transaction issues. Even if privacy-focused solutions are mature, it is useless if they do not have a sound ecosystem.
Among the decentralized solutions, the most well-known is the Tornado.Cash project, which is built on the Ethereum series. It uses zk-SNARK (Zero-Knowledge Success Non-Interactive Argument of Knowledge) technology, and can send ETH and ERC-20 tokens to any address in an inaccessible manner. However, it can only support ETH and DAI, cDAI ， USDC, USDT, WBTC. Another significant drawback of the tornado is that it consumes a lot of gas. A private operation of 1 ETH may require at least 20% excess gas (at a conservative estimate), which greatly prevents users from adopting the project.
In general, all those projects lack a one-stop privacy solution, but it is important to realize that in the blockchain space, only those projects that can ensure complete privacy are actually meaningful.
Privacy Protection of Defy and Onion Mixer
Proposes an efficient and safe solution for onion mixers. The coin Mix. It is a decentralized protocol for cross-chain private transactions, which can support DEFI transactions over multiple asymmetric chains. It follows CoinJoin “The coin Mixing “idea but also includes zkSNARK zero-knowledge proof technology, which can break the connection between a user’s deposit address and withdrawal address, so that a private transaction is realized for all DeFi components.
Decentralization and odd chain crossings are currently the development trend and market demand of Defy. The mechanism of the onion mixer technique makes it more compatible with Daffy, meaning it has more use cases.
Nowadays, the interoperability of DeFi projects is increasing, and all types of assets can be used in the DeFi protocol. Defy space also reflects the simultaneous development trend of many chains, and cross-chain asset transfer is gradually increasing. With this, the demand for privacy of users has become even more urgent. Onion Mixer’s multi-chain deployment and cross-chain transaction technology provides privacy services to more assets, making it distinct from projects like Tornado.
As Daffy is becoming more widespread and attracting more traditional institutions, mainstreaming needs to be addressed and onion mixers have the potential to do so. Due to the large transaction volume in traditional institutions, there is a strong need for anonymity. The coin Mixing Protocol. If not enough The coin Mixed transactions will have a limit of anonymity. To address this issue, Onion Mixer designs sustainable tokenomics, providing users with sufficient incentives to participate, thus increasing the total volume of anonymous transactions. The anonymous collection of onion mixer protocols is called the “mixer”. The mixer allows users to conduct private transactions at any time. The “mixer” is different from the “pool” of the tornado. The “pool” includes only one type of token, while the “mixer” supports multiple types of tokens, contributing to improved privacy protection.
To open new markets, DeFi needs to upgrade privacy protection extensively. Traditional institutions already have strict risk prevention measures, such as futures, options, swaps, etc. They do not want their investment practices exposed or monitored on the chain, as it may help their opponents attack them. Therefore, they need an immediate privacy protocol to protect their transactions, a requirement that will bring more users to DeFi. The onion mixer can combine multiple mixers together to form a cascade mixer to enhance its privacy protection capability.
Due to the decentralization of the blockchain, data is no longer controlled by a single center. Privacy protection will ensure that the importance of this feature is different. When the value of personal data is discovered, developed and used in the future, users can not only use privacy protection to protect themselves, but also control access to data by authorizing users can do. Onion mixer conforms to this trend in demand.
Undoubtedly, Defy has been revolutionary and pervasive. Future demands of DIFI will force the development and upgrading of privacy protections, which in turn will actually benefit Defy. The demand for privacy protection and DIFI are mutually reinforcing and will bring better financial services for users.
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