Personalised value transfer can make Cefi and Defi Safe
By Anantha Krishnan
The recent dissolution of FTX, and the loss of 8 billion dollars in privately held wealth that collapse has caused, serves as a stark reminder of the ongoing challenges facing the cryptocurrency market and centralized exchanges. Crypto world has a history of market volatility and currency crashes causing harm to individuals and hindering the growth of the blockchain industry. To avoid these kinds of incidents in the future, a true peer-to-peer personalized value transfer system is needed. This system would eliminate the need for central entities like FTX and instead allow individuals to transfer value directly, without intermediaries.
Despite the benefits of personalized value transfer, it has been a challenge to make it a practical reality. As a result, intermediary stable coins, such as Terra, Luna, and Tether, which claim to be backed by USD reserves, have gained widespread adoption. These band-aid solutions will never be the answer. Without a protocol that can accommodate individual ownership of unique assets, the drive to centralization will inevitably recur. Only personalized value transfer has the potential to replace fiat currency as a better system of exchange.
The first step to achieve this goal is to create a blockchain protocol that empowers users to easily create personal tokens, or native assets that reflect their personal values. This requires a blockchain that is participant-centric and context-aware, such as MOI, which uses data from the user’s context as a foundational element. This enables the execution of stateful and stateless logic natively on the network, making it possible for users to create multidimensional assets as unique personal tokens. This protocol surpasses the limitations of Ethereum and Bitcoin and provides the necessary flexibility for personalized value transfer.
Once users can connect their labor, behavior, and wealth to personal tokens, a decentralized exchange (DEX) can begin to replace traditional order-book based exchanges. DEXs eliminate the intermediate processes involved in crypto trading and allow users to trade from non-custodial wallets, where they control the private key. DEXs maintain liquidity by using an Automated Market Maker (AMM), a program that determines asset price algorithmically based on previous behavior and other factors, such as price and threshold maturity. The permissionless design of these exchanges ensures that anyone can trade assets, provide liquidity, or create new markets without interference from government or corporate entities.
DEXs are a necessary, but not sufficient, improvement to accomplish personal value transfer. DEXs like Uniswap, which operates using a set of persistent, non-upgradable smart contracts, still leave ownership of the transfer in the hands of the smart contract initiators, not the participants in the transaction. To truly revolutionize value exchange, people need to be able to create unique and personalized cryptographic tokens, at a protocol level, that represent real-world value, such as hours worked or a physical good, and exchange them seamlessly and securely with anyone in the world. In this model, price discovery of personal tokens can be accomplished by Artificial Intelligence.
To ensure the practical implementation of such a Safe decentralized financial (SDeFi) system, certain elements of centralization should be safely introduced. Without sacrificing the core principles of non-custodial wallets and personal value tokens, regulatory agencies can play a crucial role in overseeing the discovery process, to ensure that the matching process is fair and equitable. Zero-knowledge proofs (ZKPs) can be used to store and protect information, keeping user privacy intact while still complying with anti-money laundering (AML) and know your customer (KYC) laws. With this approach, users don’t need to share personal information with businesses and applications, but regulators, government, and law enforcement can still follow due-process laws to identify malicious actors. This centralized-decentralized financial model (CeDeFi), coupled with the ability to create multi-dimensional personal tokens, provides a win-win solution that overcomes traditional tradeoffs between privacy and accountability.
Personalized value transfer on a distributed network is the solution that can provide enhanced security with privacy and prevent currency crashes and price volatility to improve people’s lives. Soon, it will be possible to build a decentralized exchange that can swap historically illiquid assets and multi-dimensional personal tokens as easily as cash, revolutionizing the way value is exchanged. By using a context-aware participant centric blockchain network to create personalized tokens and AI to conduct price discovery of the personal tokens, a decentralized and autonomous peer-to-peer value transfer system can be created that provides complete security and continuous liquidity. This will prevent market crashes and create a safer and more sustainable form of commerce.
The author is founder, MOI
