On-Chain Privacy Is the Key to Increased DeFi Adoption

The Intelligent Insurer #66: DeFi privacy is one of the biggest opportunities for projects to capitalize on

The digital asset industry is teeming with innovations. Whether this is through new decentralized applications (dApps) or use cases for existing projects, the blockchain space is expanding at a breakneck pace. The decentralized and public nature of the blockchain is ironically one of the hindrances to mainstream adoption. One major challenge is convincing everyone that anonymity is not synonymous with privacy.

The latest Intelligent Insurer will dive into the present state of DeFi privacy and what it lacks. We will also consider how one network is increasing privacy and what investors can do to ensure the continued protection of their assets. Before that, we bring you exciting updates from our development team.

Insured Finance software development update

We remain committed to our goal of pushing the development of our next-gen digital asset insurance platform to the next level in 2022. We are continuing to work vigorously towards the launch of our mainnet, which is just around the corner. Over the past week, we have made a few upgrades to the platform to boost user experience and set the ground for our mainnet release.

For starters, there are a few non-coverage, voting-related claim conditions that we have updated. First, claim assessors can claim back their voting fees when a vote is escalated to all $INFI members. Second, both claim and non-claim assessors can claim voting rewards when a vote reaches consensus. The voting reward here is the total fee paid by all voters on the losing side, which is subsequently sent to all voters on the winning side. Over the past week, we completed the low-fidelity (lo-fi) prototype design for the aforementioned processes.

Next, we will complete the lo-fi design for the process where policyholders and voters need to claim for their coverage and voting rewards after a claim result is decided. We are still working on the UI design for this process and we intend to finish it before next week.

User security remains our paramount concern as we continue to rigorously test our platform’s features. We’re excited about the progress we’ve made and are certain that our next-gen digital asset insurance platform will provide our users with an incredible experience. We are currently working on the frontend development process for making a claim and claim assessors voting. We are also working on creating a wallet ahead of our mainnet deployment.

We are fully committed to becoming a go-to platform for digital asset insurance in the DeFi and crypto space with the mainnet launch. As always, our major concern is the user safety and, we will continue to explore various ways to improve our insurance products and welcome all the feedback you have.

The decentralization and privacy paradox

While there has been a massive improvement in decentralization, privacy is lagging in the DeFi space. The anonymity of blockchain transactions does not mean they are private, as they can still be traced back to the initiators. Hence, the narrative that Bitcoin is a safe space for criminals to perpetuate their crimes is now an overused trope.

Paradoxically, openness and auditability are the core principles of decentralization, one of the biggest appeals of blockchain technology. The transparency of blockchain transactions can have unintended consequences, including front-running and data exploitation. While validators are originally tasked with ensuring the integrity of the networks, this is also posing a problem. Most validator nodes can pry into sensitive on-chain data, rendering them counterproductive to privacy.

Blockchain developers have devised various means of solving the problem of privacy in the DeFi space. There are private coins like Monero, on-chain mixers, and tumblers such as Tornado Cash. There are also off-chain initiatives building privacy-centric DeFi applications, including Incognito, Haven, and the Secret Network.

However, until the problem of on-chain privacy is properly addressed, the broad adoption of DeFi will pose a challenge to mainstream DeFi investors. To provide a mainstream solution, it is not enough for developers to solve the problem of privacy alone. They must also address other limitations of the industry, including scalability, and one blockchain network is filling that role.

Blockchain network Oasis emerges to solve the privacy issue

Determined to solve the problem of privacy in the digital asset space, Oasis Labs launched Oasis Network. Oasis is the first privacy-focused layer-1 blockchain network designed for open finance and a responsible data economy. The Oasis Network is capable of powering private, scalable DeFi applications with its high throughput and secure architecture.

Built using the Cosmos SDK, Oasis prioritizes applications that promote data privacy and user confidentiality. To achieve this, the project separates its consensus layer from the contract execution layer. The Oasis consensus layer acts as a hub that utilizes the Proof-of-Stake (PoS) mechanism to validate transactions and secure the network.

The execution layer consists of multiple parallel runtimes, or ParaTimes, that are customized depending on the use case computation needs in the network. To ensure the confidentiality of data processed in a ParaTime, the nodes are required to use a secure computing technology called the Trusted Execution Environment (TEE).

This tech acts as a black box for smart contract execution in a confidential ParaTime. First, encrypted data goes into the black box along with the smart contract. After the data is decrypted and processed by the smart contract, it is then encrypted before being sent out of the TEE. This process ensures that data remains private and is never leaked to the node operator or application developer.

The project’s privacy features also create what is called “Tokenized Data”, a new type of digital asset that allows users to take control of the data they generate. Data providers can stake their tokenized data with dApps that want to analyze them. This ensures that data is kept private while being processed and provides end-to-end data confidentiality on the blockchain.

The Oasis Network currently has the backing of several top industry backers, including a16z, and its solutions are currently being applied to solve both Web2 and Web3 problems. ROSE is the native token of Oasis Network with a supply cap of 10 billion tokens. It is used for paying transaction fees, delegation on the consensus layer, and staking by validator nodes. The network currently has a TVL of $182 million and ValleySwap, its in-house decentralized exchange (DEX) contributes more than 80% of this value.

(Source: DeFiLlama)

DeFi privacy is the next big thing for the industry

With more investors venturing into the DeFi space, the demand for privacy-centric applications will increase exponentially. Therefore, the DeFi industry needs better on-chain privacy that can accommodate multiple projects while maintaining adequate transparency. The few privacy-focused solutions available in the market need improvement before they can achieve large-scale adoption.

For one thing, most of these protocols are too complex for the average DeFi user to utilize. Investors need technical knowledge to navigate these innovative solutions as a single user error can result in the loss of investment. Improving the user experience and the ease of use will encourage investors to utilize them more.

Additionally, the bad players in the industry are constantly devising new methods of exploiting projects and stealing investors’ funds. Privacy-focused blockchain solutions make it impossible to trace the movement of funds stolen through hacks, phishing attacks, and more.

These features additionally place the average investor at risk. Therefore, to ensure all-around protection of their assets, investors must add insurance products to their portfolios. These insurance solutions, such as the ones offered by Insured Finance, protect investors from both common and unforeseen losses. Armed with these solutions, investors can actively participate in multiple DeFi markets and rest assured that their assets are safe.

About Insured Finance

Insured Finance is a decentralized, peer-to-peer insurance marketplace. Users can request customized insurance on a wide variety of digital assets, thereby ensuring full protection. Those fulfilling requests can earn premiums and earn a competitive return on their capital. Claims are fully collateralized and settled instantly.