Decentralised Finance Archives

A close-up of an eye iris scanned into a biometric Orb for the proof of humanity to get access the WorldCoin digital asset.

Orb Envisions a New WorldCoin Asset

August 7, 2023

WorldCoin's Orb – a beacon of identity verification, heralding a new age of accessible cryptocurrency by Melvin Hoyk.

WorldCoin is a project that aims to create a global identity and financial network that is owned by everyone. It consists of a digital currency called WLD and a digital identity called World ID. To get a World ID, users need to visit an Orb, which is a biometric verification device that scans their iris and verifies their humanness and uniqueness. The Orb then deletes the image and generates a zero-knowledge proof that the user is a real person. The user can then claim a share of WLD tokens for free, as well as use their World ID to prove their identity online without revealing any personal information. WorldCoin claims that this system can increase economic opportunity, enable global democratic processes, and potentially pave the way for AI-funded universal basic income (UBI). In this article, we will explore the benefits and challenges of using iris scanning and zero-knowledge proofs for identity verification and financial inclusion, as well as the potential risks and limitations of WorldCoin.

The Benefits of Iris Scanning and Zero-Knowledge Proofs

One of the main advantages of using iris scanning for identity verification is that it is highly accurate and secure. The iris is a unique feature of the human eye that does not change over time, unlike fingerprints or facial features. It is also difficult to forge or spoof, as it requires a high-resolution image and a live scan. Moreover, iris scanning does not require physical contact with the device, which reduces the risk of contamination or damage.

Another benefit of using iris scanning is that it can be combined with zero-knowledge proofs (ZKPs), which are cryptographic techniques that allow one party to prove something to another party without revealing any information other than the fact that the statement is true. For example, Alice can prove to Bob that she knows a secret password without telling him what it is. ZKPs can be used to create digital identities that are anonymous, verifiable, and unlinkable. This means that users can prove their identity without disclosing any personal information, such as their name, address, or date of birth. They can also use different identities for different purposes, such as voting, banking, or social media, without linking them. This enhances the privacy and security of the users, as well as their control over their own data.

How WorldCoin Works in Practice

WorldCoin works by distributing WLD tokens to anyone who creates a World ID using an Orb device. The Orb device is a spherical metal object that contains a camera and a screen. It scans the user’s iris and generates a ZKP that proves that the user is a unique and real person. The ZKP is then sent to the WorldCoin network, which verifies it and allocates a share of WLD tokens to the user’s wallet. The user can then use their WLD tokens to access various services and platforms that accept them as a form of payment or reward. The user can also use their World ID to prove their identity online without revealing any personal information.

WorldCoin launched its beta program in July 2023, after raising $25 million from investors such as Andreessen Horowitz, Coinbase Ventures, Reid Hoffman, Naval Ravikant, and Sam Altman (OpenAI). The beta program involved more than 2 million users from 20 countries who each received 25 WLD tokens. WorldCoin plans to distribute 10 billion WLD tokens over the next 10 years, with 70% going to users, 20% going to developers and partners, and 10% going to the team and investors. WorldCoin also aims to deploy thousands of Orb devices worldwide, especially in developing regions where access to digital identity and financial services is limited or nonexistent.

The Potential Risks and Limitations of WorldCoin

While WorldCoin has an ambitious vision and an innovative technology, it also faces some challenges and criticisms. One of the main concerns is the privacy and security of the user’s biometric data. Although WorldCoin claims that the Orb device deletes the iris image after generating the ZKP, some experts doubt whether this process is truly secure and irreversible. Moreover, some users may be reluctant to share their iris scan with a third-party device that they do not fully trust or understand. There is also a risk of coercion or fraud, where someone may force or trick another person into scanning their iris for malicious purposes.

Another challenge for WorldCoin is scalability and adoption. While WorldCoin has distributed millions of WLD tokens to its beta users, it still needs to convince more people and platforms to use them as valuable currency or utility tokens. WorldCoin also needs to ensure that its network can handle increasing transactions and users without compromising its speed, security, or decentralization. Furthermore, WorldCoin needs to comply with the legal and regulatory frameworks of different jurisdictions, which may vary in their recognition and treatment of digital identities and cryptocurrencies.

One of the recent issues that WorldCoin faced was an alleged Sybil attack, which is a type of attack on a computer network service in which an attacker subverts the service’s reputation system by creating a large number of pseudonymous identities and using them to gain a disproportionately large influence. According to Trusta, a platform that analyzes on-chain data, 130 clusters of fake identities manipulated 20 or more WLD tokens each, by using biometric verification to create multiple Gnosis Safe wallets and claim WLD tokens for free, then transferring them to other addresses for profit. This suggests that WorldCoin’s identity verification system may not be as secure or reliable as it claims to be and that its distribution of WLD tokens may not be fair or equitable.

Another tweet from Eric Wall questioned the economic control of the keys linked to the iris scans of the users, implying that the users do not have full ownership or access to their World IDs or WLD tokens and that they may be vulnerable to fraud or manipulation. This raises doubts about the decentralization and sovereignty of WorldCoin, and whether it truly empowers its users or exploits them.

Conclusion

WorldCoin is a project that aims to create a global identity and financial network that is owned by everyone. It uses iris scanning and zero-knowledge proofs to verify the humanness and uniqueness of its users and distributes free WLD tokens to them. WorldCoin claims that this system can increase economic opportunity, enable global democratic processes, and potentially pave the way for AI-funded universal basic income. However, WorldCoin also faces some challenges and criticisms, such as privacy, security, scalability, adoption, and regulation. WorldCoin is not the only project that uses biometrics and blockchain for identity verification and financial inclusion, as there are other similar projects or solutions that have different approaches and goals. WorldCoin is an interesting and innovative experiment that may have a significant impact on the future of digital identity and finance.

Will I give WLD a try? I’m in Malaysia now, and the nearest countries that provide Orb are Singapore and Hong Kong. With the sign-up using Orb, you will get 25 WLD tokens for free, which are worth $2.45 USD each, or around $61.25 USD in total. With that amount, I will just be a spectator for now. I wouldn’t spend money on flight and accommodation expenses just to get that $61.

You can find more information about WorldCoin and its Orb here:

https://worldcoin.org/
Understanding the Orb and why WorldCoin uses biometrics
Opening the Orb: A look inside WorldCoin’s biometric imaging device

Individual working as a group across the globe on the blockchain. Each with computer plugin into the blockchain.

The Inner Workings of Blockchain

July 20, 2023

Embracing Decentralization for Power Distribution Across Nodes by Melvin Hoyk.

Blockchain technology, with its promise of decentralisation, transparency, and security, has revolutionised numerous sectors, from finance and healthcare to the supply chain and education. But how does blockchain work, and what makes it so different from the traditional internet infrastructure? Let’s explore these questions and more.

Centralised Vs. Decentralised Networks
The traditional internet infrastructure operates on a centralised model. Information flows through servers owned by Internet Service Providers (ISPs), tech giants like Google or Amazon, or other third parties. While effective, this system presents potential vulnerabilities, such as single points of failure or misuse of data.

Unlike traditional systems, blockchain operates on a decentralised model where control isn’t held by a single entity. Instead, the network is maintained by numerous nodes, or computers, participating globally. This means anyone, anywhere with an internet connection can join the network. Consequently, blockchain and its associated cryptocurrencies are not restricted to the rules or economy of any one country. Even if one nation imposes limitations, the activities can continue in other parts of the world. In essence, blockchain is a global, democratised system of digital trust.

The Role of Nodes in a Blockchain Network
Nodes are the lifeline of a blockchain network. Each one holds a copy of the entire blockchain, including all transactions ever made. They follow a consensus protocol to agree on the contents of the blockchain, ensuring no single party can manipulate the data.

Nodes have a crucial role in the functioning of the blockchain network. They validate transactions and record them onto the blockchain. When a new block is added, all nodes must agree on the validity of the transactions it contains.
Importantly, a node must be online to perform its functions. If a node goes offline, it will not be able to validate and propagate transactions. However because there are numerous nodes in a network, the system can withstand several nodes going offline without compromising the operation or security of the blockchain.

Who Runs the Nodes?

An assortment of participants run nodes:

Blockchain and Node.js: A Clarification
One common point of confusion is the difference between blockchain nodes and Node.js. Blockchain nodes are computers maintaining the network, while Node.js is a JavaScript runtime environment used for developing server-side applications. The term “node” in both instances refers to their function as a network node, albeit in entirely different contexts.

The Blockchain Public Library Metaphor

Blockchain as a Library:

Blocks as Books:

Nodes as Librarians:

Chain of Books:

Immutable Rules:

Our public library metaphor simplifies the core features of blockchain technology: decentralisation, immutability, security, and transparency. Think of the blockchain library as always open 24/7, ensuring efficient transactions, with librarians (miners) maintaining order.

Conclusion
Blockchain technology has significantly transformed our perception of secure, transparent, and decentralised transactions. By understanding its inner workings, we can better appreciate its potential and applications. Whether it’s individuals with an interest in decentralisation, businesses leveraging the technology, or developers exploring new possibilities, everyone contributes to maintaining the robust and secure functioning of the blockchain network.
Blockchain technology, while complex, operates on the principles of transparency, security, and decentralisation, making it a revolutionary force in today’s digital world.

A huge bitcoin emerge from the financial building area. People were staring at it.

The Global Embrace of Digital Assets

July 14, 2023

BlackRock and Hong Kong Set the Course for Future Innovation by Melvin Hoyk.

The ascent of digital assets like cryptocurrencies, tokens, and blockchain-based platforms is unmistakable within the world’s financial system. Despite challenges such as price volatility, security, and regulatory compliance, the allure of digital assets remains strong, offering the benefits of innovation, inclusivity, efficiency, and transparency.

The international stance towards digital assets varies greatly, with some countries welcoming the potential of these digital innovations, while others remain apprehensive. This article explores the advancing wave of digital assets through the lens of two pivotal developments: BlackRock’s proposal for a Bitcoin ETF in the U.S. and Hong Kong’s urge for major banks to embrace digital assets.

Inside BlackRock’s Bitcoin ETF Journey

As the world’s largest asset management firm, BlackRock supervises over $9 trillion in assets (as of December 31, 2022). With nearly $4 trillion in assets under management, its iShares portfolio is the biggest U.S. family of ETFs. The financial titan is now venturing into the crypto arena, viewing digital assets as a promising asset class.

On June 15, 2023, BlackRock requested SEC approval for a spot Bitcoin ETF. This ETF would reflect the current Bitcoin price, providing investors with a more straightforward, affordable way to invest in Bitcoin. Yet, the SEC hasn’t green-lighted any spot Bitcoin ETFs in the U.S., citing concerns around market manipulation and investor protection.

BlackRock’s move, despite uncertainty, fuels optimism among financial firms and crypto supporters, hopeful that a spot Bitcoin ETF will soon get a nod in the U.S.

Unpacking the Bitcoin ETF: You Own the Fund, Not Bitcoin

A Bitcoin ETF, or exchange-traded fund, is a type of investment fund that shadows the price of Bitcoin, the world’s leading cryptocurrency. This form of investment permits individuals to trade shares on conventional exchanges like the NYSE or Nasdaq. Importantly, investors don’t directly deal with the complexities and risks of owning Bitcoin themselves.

When you invest in a Bitcoin ETF, you’re essentially purchasing shares in a fund, not the actual Bitcoin. The responsibility of handling the buying and selling of futures contracts, covering associated fees, and dealing with potential risk falls on the fund manager. This way, investors can gain exposure to the Bitcoin market without the need to buy and store the cryptocurrency themselves.

While investing in a Bitcoin ETF offers a simplified entry into the Bitcoin market, it isn’t without its drawbacks. These include management fees and the necessary trust in the fund manager’s ability to accurately track Bitcoin’s price. Moreover, as investors, it’s important to remember that although you’re investing in a fund that tracks Bitcoin’s value, you don’t have control over any actual Bitcoin assets, nor can you use your fund shares for transactions or transfers that would typically be possible with actual Bitcoin.

Hong Kong’s Initiative Towards Crypto Integration

Hong Kong has adopted a distinct legal and regulatory framework for cryptocurrencies, differing from mainland China. The Hong Kong Monetary Authority (HKMA) aims to establish a new regulatory environment for crypto assets by July 2023, focusing on three key areas: stablecoins for payments, investor protection, and the interface of Authorized Institutions (AIs) with crypto assets.

Despite the bank’s apprehensions, the HKMA is pressuring HSBC, Standard Chartered, and Bank of China to take on crypto exchanges as clients to boost innovation and financial inclusion. However, this effort encounters resistance due to concerns about regulatory uncertainty, reputational risk, and operational challenges.

In Conclusion

The push for a Bitcoin ETF by BlackRock and Hong Kong’s drive for bank adoption of digital assets showcases how digital assets are increasingly gaining acceptance. These significant moves could influence the global adoption and regulation of digital assets. As the crypto industry continues to mature, such developments offer potential opportunities for investors, businesses, and regulators, alongside accompanying challenges and uncertainties.

BlackRock’s entrance into the crypto realm, though met with different opinions, signifies a monumental step for the industry. However, prospective investors should always conduct thorough research before investing in digital assets and not let FOMO lead to unwarranted risks. After all, while digital assets offer enticing opportunities, they are not without risks. As with any investment, it’s essential to only invest what you can afford to lose.

Asset digital coins in dynamic, flying around.

Unlocking Freedom with Decentralised Finance (DeFi)

June 3, 2023

The world of finance is witnessing an extraordinary shift, as new technologies upend traditional systems and pave the way for innovation. Central to this transformation is Decentralised Finance, or DeFi, a radical reimagining of financial systems that has the potential to democratise access to financial services. But what exactly is DeFi, and what does it entail? Let’s delve in.

Understanding DeFi

DeFi stands for “Decentralised Finance”, an umbrella term for financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries. At its core, DeFi aims to replace centralised financial systems (banks, insurance companies, and so on) with transparent protocols that aren’t controlled by an individual entity.

Using blockchain technology, particularly Ethereum, DeFi applications aim to recreate traditional financial instruments in a decentralised architecture, outside of companies’ and governments’ control. This enables a system where everyone, regardless of their location or status, can access financial services without going through a centralised authority.

The Building Blocks of DeFi

DeFi comprises several key components. Here are some of the main ones:

Stablecoins: Stablecoins are cryptocurrencies designed to minimize the volatility of the price of the stablecoin, relative to some “stable” asset or a pool of assets. Examples include Tether (USDT) and USD Coin (USDC).

Decentralised Exchanges (DEXs): DEXs are platforms that allow peer-to-peer cryptocurrency transactions to take place online securely and without the need for an intermediary.

Lending Platforms: DeFi lending platforms allow users to lend and borrow cryptocurrencies directly from their peers, earning interest in the process.

Yield Farming: This involves lending out cryptocurrencies in return for interest and fees. The interest rates are usually decided by algorithms that balance out supply and demand.

Liquidity Mining: Similar to yield farming, liquidity mining involves providing liquidity to a project in exchange for interest and rewards.

Wrapped Bitcoins (WBTC): This DeFi service enables users to earn interest on their Bitcoin holdings by transforming them into tokens that can be used on the Ethereum network.

Prediction Markets: These are platforms where users can bet on the outcome of future events, like elections or weather forecasts.

Insurance: Decentralised insurance platforms allow users to take out policies directly on the blockchain, typically powered by smart contracts.

The Potential and Risks of DeFi

DeFi holds significant potential, promising to make the financial system more open, efficient, and equitable. However, like all nascent technologies, it also comes with risks. These include smart contract vulnerabilities, volatile crypto prices, and regulatory uncertainties. Despite these challenges, DeFi remains one of the most promising areas of the blockchain industry.

In conclusion, DeFi is a revolutionary force with the potential to disrupt traditional finance by making it more inclusive, efficient, and transparent. While it has its share of risks and challenges, its continued growth and evolution make it a critical area to watch in the blockchain and cryptocurrency space. As we delve deeper into the world of DeFi, we can anticipate witnessing a transformation that could reshape our financial interactions’ very fabric.

Centralised person (Bank) standing with decentralised blockchain floating in the background.

Decentralisation: Heart of Digital Assets & Future Finance

June 1, 2023

I. Introduction:

The world of finance is undergoing a monumental shift as it treads towards decentralisation. The rise of digital assets, powered by cutting-edge technologies like blockchain, is at the core of this transformation. But why this shift? To understand, we must first take a journey back in time.

II. The Historical Evolution of Finance:

Finance has evolved significantly throughout history, moving from primitive barter systems to gold and silver coins, paper money, and then to modern banking. Centralised banking, with its regulated structures and gatekeepers, played a crucial role in this evolution. However, like any system, it has its drawbacks.

III. Centralised Banks – The Limitations:

Despite providing a semblance of structure and security, centralised banks often limit access to necessary financial services. Individuals without a bank account, the unbanked or underbanked, face significant hurdles in accessing basic financial services. Additionally, high transaction fees, lack of transparency, and susceptibility to systemic failures are significant drawbacks.

IV. The Advent of Blockchain and Cryptocurrency:

Enter blockchain and cryptocurrencies, two revolutionary technologies promising to address some of these challenges. They offer an alternative financial ecosystem, one that isn’t controlled by a central authority but is instead distributed across a network of computers.

V. Decentralisation – A Paradigm Shift:

At its core, decentralisation is about distributing and delegating authority away from a central body. In finance, this implies that transactions don’t need a central authority like a bank or government to validate them. This fundamental shift empowers individuals, enhances transparency, and increases security while fostering an environment where innovation can thrive. The democratisation of finance through decentralisation potentially allows anyone, anywhere, to access and participate in this new financial landscape.

VI. Ethereum – A Case Study:

Ethereum offers a compelling example of decentralisation’s transformative power. Unlike Bitcoin, Ethereum isn’t just a digital currency. It’s a blockchain-based platform that allows developers to build and deploy decentralised applications (DApps) and create new digital assets. With its smart contract functionality, Ethereum has become the backbone of the Decentralised Finance (DeFi) movement and the birthplace of Non-Fungible Tokens (NFTs), demonstrating the versatile applications of decentralisation.

VII. Risks and Challenges of Decentralisation:

However, it’s crucial to understand that decentralisation isn’t without its challenges. Regulatory hurdles, scalability issues, and security risks are among the significant concerns. Additionally, the lack of a central authority can sometimes lead to disputes that are difficult to resolve. Therefore, while the potential of decentralised finance is immense, navigating these challenges is vital for its long-term success.

VIII. Conclusion:

The shift towards decentralisation in digital assets is a response to the limitations of traditional, centralised finance. By offering increased access, transparency, and a platform for innovation, decentralised systems like Ethereum are challenging the status quo and paving the way for a new, inclusive financial future. However, as with any disruptive technology, the road ahead requires careful navigation of risks and challenges. As we embrace this new financial paradigm, we should strive for balance, fostering the advantages of decentralisation while mitigating its potential pitfalls.