Arkius: Bringing Order to the DeFi Wild West
Decentralized Finance (DeFi) dominated the financial news cycle in early 2022. After a tumultuous 2020, DeFi served as a much needed bright spot as the world markets moved towards recovery in 2021. However, rampant fraud and jaw-dropping scams such as the $325 million Wormhole Portal token theft have damaged the perceived legitimacy of DeFi as an investment. For many investors, DeFi is a landscape sown with significant financial risk.
Yet, despite the $14 billion in stolen Bitcoin criminals acquired in 2021, DeFi has enormous potential to transform financial markets — in a good way. DeFi powers global entrepreneurships, speeds B2B payments across legacy payment rails, and transforms supply chain management through innovative smart contracts.
But how do we legitimize DeFi? How does DeFi become a place known for its efficiency, innovation, and security rather than its opacity and risk?
Official Legitimization
Legitimization traditionally arises through a recognized regulatory body, such as a government or non-governmental organization (NGO) whose authority is based on universal acceptance by the system’s participants. Take a hundred-dollar bill for example. We all agree that a piece of fancy paper printed with a dollar amount, an official signature, and “This note is legal tender” legitimately has its printed value. That’s because the government has sanctioned the printing of paper currency and everyone agrees to accept it as payment for goods and services.
But decentralization takes the regulatory body out of the picture. So who says what’s legitimate?
At present, DeFi also lacks a trusted, independent news source or authentication body rooted in the idea of collective agreement to verify information.
Hence, we have a Wild West atmosphere. From the Squid Game rug pull to the Wormhole Portal scandal, a lack of transparency combined with bad information cost investors (and the marketplace) hundreds of millions of dollars. DeFi scams do more than ruin investor confidence: they damage the future of the space itself by making it less likely that institutional investors and those new to investing will trust enterprising DeFi startups.
It’s true we’re seeing more frequent gestures toward legitimization. U.S. banks are already allowed to provide cryptocurrency custody services and several are taking tentative steps into the field. Governments are making crypto profits and wages taxable as income. The European Investment Bank recently issued €100 million in two-year digital bonds on the Ethereum network. El Salvador made Bitcoin legal tender, and several countries are offering Bitcoin ETFs for purchase. And so on.
Popular Legitimization
Another form of legitimization — public understanding, acceptance, and adoption — has also been advancing. Politicians are encouraging DeFi adoption with plans to accept tax payments and even mayoral salaries in cryptocurrency. News sites are racing to publish guides and how-tos for understanding and taking part in blockchain transactions (cryptocurrency, NFTs). Small businesses are springing up to advise the public on cryptocurrency investing.
Yet despite a discernible shift in the marketplace, we are left with questions: Whom to trust? How to get involved with DeFi responsibly? How safe is it to invest in DeFi right now?
Legitimizing DeFi projects with Arkius®
On every level, DeFi’s progress is a patchwork of experimentation — guarded steps toward a seemingly far-off goal. None of it solves the problem of the built-in friction between, on the one hand, the anonymity and decentralization of the blockchain technology that underlies cryptocurrency and DeFi, and on the other, the benefits of regulation and oversight by a central authority.
Fortunately, there is a solution to this problem.
With its unique authentication schema, the Arkius Three-Way Ecosystem exemplifies how a decentralized, data-driven financial system can be a secure venue for investors and savers. Members receive only content that aligns with their interests and has been validated by third-party Certifiers.
Thus Arkius puts the community member or the investor in control of the information they see, making trust an effortless process. Discover how we’ve made transparency the heart of our business model.
