DeFi failed the crypto community. So what comes next?
RIP: Decentralized Finance. You had a good run, but by 2020, things weren’t looking so great anymore. That was the year that — according to The Motley Fool — crypto scams cost investors a whopping $419 million, up 800% from the $50 million estimated to have been lost due to scams in 2019.
That estimate for 2021? More than $14 billion.
But where did things go wrong?
Decentralized finance, or DeFi, began with a simple, but noble, promise. Namely, that access, innovation, and safety would result from the removal of central banks and other regulatory bodies in their traditional role as intermediaries and arbiters of financial transactions.
But great power requires great responsibility; unfortunately, the lack of oversight in DeFi has also meant a lack of protections for good-intentioned players. From rug pulls to pump-and-dumps… to honeypots, sudden project shutdowns, and even outright theft, almost every holder in the DeFi space has been the victim of a scam of one form or another.
In its current form, DeFi has failed.
As Chainanalysis’ 2022 Crypto Crime Report puts it, “DeFi is unlikely to realize its full potential if the same decentralization that makes it so dynamic also allows for widespread scamming and theft.” Indeed, the Wild West nature of DeFi has invited a growing number of attempts at regulation — the very thing DeFi sought to avoid.
As it turns out, honest holders aren’t safe from scammers, and the scammers aren’t immune to the long reach of law enforcement and regulatory agencies.
So if no one is safe, and everyone operates under a microscope, who wins?
Change has long been overdue.
When we set out to create the Bridges ecosystem — consisting of a token and soon-to-launch exchange — we did so with the view that there was a middle ground between centralized and decentralized financial systems.
At Bridges, we embrace the innovative potential of DeFi and the importance of democratizing access to financial products and services. At the same time, we believe that these goals will only be achieved through a framework that actively works to minimize scams, protect intellectual property, and promote the safety (and equity) of holders and investors alike.
We call it semi-decentralized finance.
Bridges is the world’s first dividend-paying, anti-scam, decentralized exchange. In practice, that means that we believe in the core tenets of DeFi, namely:
- Open source access
- Anonymous usage
- Decentralized governance
We then combine these tenets with a commitment to:
- Safety: New projects will need to pass a safety check, including using anti-whale practices and locking a majority of their liquidity (at least 70%) if the project is using a liquidity auto-feeding mechanism. The contract itself will need to be audited before launch. Developers will also be vetted and are required to be either doxxed or to complete a private KYC identification.
- Innovation: Currently, only a small percentage of developers are bringing innovation. This is because for each small innovation, many other projects immediately come out copying the original one, saturating the market and creating confusion for the holders who have to filter between thousands of copies to find the “hidden gems”. To be listed on our exchange, projects will need to bring innovation. Projects will be required to provide their own whitepaper that explains the innovation and particulars of their project.
The Bridges Ecosystem will bring benefits to both holders and developers.
Holders will find a safe place, knowing that projects listed on Exchange undergo a rigorous selection procedure. For developers, being listed on the exchange will give the project more credibility and will help the project to differentiate itself from the critical mass of low quality projects that exist.
To learn more about Bridges, check out our white paper here.