- The FTX scandal has caused significant damage to the crypto ecosystem, but a silver lining is that it will hasten the development of a regulatory framework for cryptocurrencies.
- Smart contracts and DeFi have the ability to transform global finance, it will just take more time as the technology is still in its infancy and has yet to establish itself as a large, global body of developers.
- The main thing holding DeFi back have been hacks and protocol exploits, but as time passes, the ability to audit smart contracts continues to evolve, helping to limit the number of potential exploits.
- Institutional investors will not invest in cryptocurrencies in a major way until clear regulations have been established, and the company, FTX, may have helped speed up that eventuality.
Much has been said about the FTX US cypto collapse since the news broke in early November that the former top-three crypto exchange was in trouble and ultimately had to file for Chapter 11 Bankruptcy.
And it's not just cryptocurrency news publications that picked up the story of crypto drama, as the high-profile nature of FTX’s public dealings – from celebrity endorsements during high-cost super bowl ads to multimillion-dollar political donations – had the saga plastered across mainstream news outlets as well.
Unfortunately, in the rush to cover the crypto scandal, which has had devastating effects on the cryptocurrency ecosystem, Bitcoin and blockchain technology have been lumped together with FTX US as if they were one and the same, leading many to write the whole industry off as one big scam.
But, what is FTX? In reality, FTX is more representative of the problems that have plagued the traditional financial system its entire existence. Had the tools of blockchain technology and decentralized finance (DeFi) been implemented at the exchange, its spectacular downfall would never have happened.
For this reason, platforms like SOMA.finance, which offer the best of DeFi while operating in compliance with government regulations such as KYC/AML verifications, represent the next evolution of global finance.
The Power of Smart Contracts
The secret to DeFi’s ability to transform the financial realm lies in the power of smart contracts. In simple terms, a smart contract is just a program stored on a blockchain that is designed to run when certain predetermined conditions are met. They help to automate the execution of agreements between two or more parties and remove the need for a trusted middleman.
Currently, institutions like banks and trading companies operate as the “trusted middlemen” for many of the transactions that take place in society, but lately, the public has begun questioning the “trusted” part.
The company, FTX, and its former CEO Sam Bankman-Fried (SBF) – who was being sold as the next Warren Buffet by the mainstream media before his epic downfall – have once again highlighted the need to remove the control of the wealth of millions of investors from a small number of people who operate unchecked.
Once a smart contract has been written and had its code reviewed multiple times over for any potential bugs or backdoors, the code becomes law and no human will be able to unknowingly “loan” out client funds to make risky bets in the open market and cause another crypto scandal.
Through the combination of smart contracts, blockchain technology and the tools created for DeFi, SOMA.finance offers faster trade settlement speeds and increased transparency on a state-of-the-art, non-custodial cryptocurrency trading platform.
Our advanced DeFi platform comes with all the protections afforded by TradFi, including better safety with protections from a U.S. broker-dealer, increased fairness, insurance backing provided by SIPC, and a robust regulatory framework that reduces risk exposure to customer accounts.
Challenges Holding DeFi Back
The ability of smart contracts to evolve finance is obvious, but that doesn’t mean that blockchain technology and DeFi are without their faults and roadblocks –as was made clear after the crypto crash of 2022.
One of the biggest barriers to adoption is the ongoing problem of hacks, which have resulted in billions of dollars worth of lost funds as black hat hackers exploit vulnerabilities in complicated smart contracts.
Even though it has been more than a decade since Bitcoin was first introduced and more than seven years since Vitalik Buterin introduced blockchain smart contracts to the world, the fact of the matter is that the technology is still in its infancy and has growing pains ahead of it.
As smart contracts become more widely adopted and taught to up-and-coming coders and developers early in their careers, the ability to audit them and ensure there are no exploits or back doors will improve.
Evidence that this evolution is already taking place can be found by analyzing the data of the crypto collapse of 2022 and hacks that occurred in the same year. The vast majority of funds that were stolen from the DeFi ecosystem occurred via protocol bridges, which are considered by many to be “infrastructure” rather than DeFi. As time progresses, issues with the code for these protocols will also be improved, helping to limit the available attack vectors for hackers.
SOMA.finance looks to lead the field in this regard, as its smart contracts have been fully audited multiple times by the best auditors in the business to ensure that its users' funds remain safe and secure.
SOMA.finance has brought the safety offered by government-regulated institutions to the world of DeFi so that crypto users can access their favorite parts of the ecosystem – including tokens, digital securities, gaming, metaverse, NFTs, yield farming, staking, lending, and mining – in one easy to use and regulatory compliant platform.