Fractal x CrowdSwap: Making DeFi Safer With KYC
Fractal is proud to announce our partnership with CrowdSwap, the cross-chain opportunity provider for decentralized finance (DeFi). Fractal is supporting CrowdSwap by providing smooth KYC onboarding, enabling users safe access to the best opportunities in DeFi.
The Challenge & The Opportunity
DeFi is one of the largest growing industries today, with a value ±$79B. It is bringing new opportunities for users to invest and manage their assets. However, scams and exploits are among the top risks associated with DeFi. In 2021 alone, investors lost a total of ±$10B in DeFi scams and theft as an unfortunate result of the anonymous nature of DeFi.
With more criminals exploiting the DeFi space, regulators are more concerned than ever about the industry growth, driving them to push measures and bring due diligence standards from the traditional finance world that may undermine DeFi.
A recent example of this is the Transfer of Funds Regulation (TFR) draft, which was approved by the EU’s parliament earlier this April. Under the TFR, all crypto transfers over €1000 will need to include information identifying the source of the assets and the recipient, and all crypto platforms will be required to store, verify, and share transactional data with regulatory authorities.
Such regulations may minimize illicit activities but will definitely disrupt the privacy of DeFi users and will be a significant setback to the growth of the DeFi ecosystem in Europe.
Although we don’t agree with the extent of the regulatory scrutiny currently suggested, and are confident that it won’t go live like this, we not only have to think about the impact of upcoming regulations but use the TFR as an opportunity to innovate and rethink how we want to foster and embed deep levels of trust in DeFi while still preserving user privacy.
So, what to do?
With emerging solutions of decentralized identity, DeFi has the potential to be a place where you can privately transact with every counterparty and stay safe knowing that you are not exposed to bot armies, unfair arbitrage, criminals or sybil attacks. That is what the Fractal — CrowdSwap partnership is all about; to enable a deep level of trust and safety in DeFi. Opening a chance that the DeFi space might even be a lot safer and more transparent than traditional finance has ever been.
This is where decentralized KYC credentials come in:
Implementing decentralized KYC credential solutions to DeFi platforms will add a layer of security that strengthens the resilience of those platforms against cybercrimes, and protects both the platform and the users from exploitations.
On one hand, KYC ensures that users are who they claim to be and that they do not have criminal records that may compromise the safety of the platform or investors.
On the other hand, the decentralized aspect of KYC, which ensures that no data is stored on-chain, brings trust to the platform and ensures that users’ data is owned and protected by the users themselves.
As a result, deploying KYC solutions on DeFi platforms can evidently solve the issue of criminal activities on these platforms, creating a safe and fair environment for investors and encouraging mainstream adoption.
Fractal x CrowdSwap Partnership
Together, Fractal and CrowdSwap will work to bring more trust and safety to the DeFi environment while maintaining data privacy. Here’s an example:
Let’s assume you and your counterparty do not know each other, and you do not want to share any personal information about each other or with the smart contract. However, you still would like to to be assured that both sides are legit — for ethical, fairness or risk-aversion reasons. By tapping Fractal’s Decentralized ID credentials, CrowdSwap is going to enable just that — a trustless, privacy-preserving, yet identity-verification-based way to DeFi. We, as well as the protocol we are utilizing, don’t need to know each other, we just need to know that everyone from the crowd is legit and we can treat and trust each other like friends would do.
As a result, implementing Fractal’s KYC to CrowdSwap’s platform will:
- Safeguard CrowdSwap’s investors against money laundering and other illicit activities.
- Help investors identify the legitimacy of their counterparties, protecting their assets and helping them make better decisions.
- Protect the platform and its community from unfair arbitrage (e.g. botting, front-running) by ensuring the uniqueness and legitimacy of all investors.
- Ensure the platform’s compliance to national regulations without compromising the privacy of investors, evidently leading to better transparency and fostering mass adoption.
Benefits to CrowdSwap Users
Although CrowdSwap users are not required to KYC, however, those KYC whitelisted investors will gain:
- Smooth and user-friendly KYC experience using their Fractal ID and wallet
- Exclusive access to the best opportunities on CrowdSwap’s platform.
- Reduced CrowdSwap fees
- Prepared for the future of KYCed wallets
Users with Fractal ID can allow for KYC verification at wallet connect and take advantage of the above mentioned benefits.
CrowdSwap is proud to have a great partner on its side to build the future of DeFi. Meeting “good” regulations and enhancing the crypto space to build a better financial system for everybody is a keen goal. Together with Fractal we can make DeFi more secure without the hassle of never ending KYC processes. In a decentralized world with privacy as a value, the user will decide based on trust.
Christian Mülder, CrowdSwap Co-Founder
CrowdSwap is a cross-chain opportunity provider for the DeFi space. With best-price-routing and cross-chain solutions CrowdSwap provides safe passage to take the best opportunities fast and from anywhere. On-Chain analysis will constantly monitor the market and provide you with the best options for your assets. Find out how easy it can be at CrowdSwap.
Fractal’s mission is to empower and encourage users & businesses to exchange data in a privacy-preserving way so that the balance of power and control between web platforms and their users is restored. Find out more in our roadmap for 2022.
This article does not include elements of any contractual relationship. This article shall not be deemed to constitute a prospectus of any sort or a solicitation for investment or investment advice; nor does it in any way pertain to an offering or a solicitation of an offer to buy any securities in any jurisdiction.
For the avoidance of doubt, please note that the Protocol has not been fully developed. Any statements made about the Protocol are forward-looking statements that merely reflect Fractal’s intention for the functioning of the Protocol. There are known and unknown risks that can cause the results to differ from the forward-looking statements.
Fractal does not intend to express investment, financial, legal, tax, or any other advice, and any conclusions drawn from statements in this article or otherwise made by Fractal shall not be deemed to constitute advice in any jurisdiction.