The entire crypto industry should strive for the level of transparency seen in DeFi, Chainalysis Chief Product Officer Pratima Arora writes in the new PYMNTS eBook, “2023 Payments New Year’s Resolutions.”
There is no doubt that 2022 was a tough year across the crypto industry, what I believe is the future of payments. And we can’t address that tough year without reflecting on what happened to FTX. But there is good news for the year ahead, and that’s because what happened at FTX was not a failure of crypto; it was the alleged fraud of one organization. These scenarios happen in every industry, and they will happen again. But we can look ahead to 2023 and build and grow from here with this in mind.
In the year ahead, why do I still believe in the power of crypto? Because crypto will reinvent the exchange of value in the same way the internet reinvented the exchange of information. And like with the early internet, some companies will fail, and some will succeed. The maturation of the industry will take time.
As we look ahead to 2023, I’d like to focus my optimism and our resolutions on two things: security and transparency.
One trend that continued to amplify in 2022 was hacks, and specifically hacks of cross-chain bridges, which accounted for 64% of losses all year. These events target the sinew between blockchains and DeFi projects, and often, they successfully compromise hundreds of millions of USD equivalent value. I suspect this to continue in the future, as more likely than not, interoperability between blockchains will remain an important goal of the community.
Similar to how our industry came together after the endless hacking of centralized exchanges in 2019, we need to do the same in DeFi. Given the losses and the promise of DeFi as an antidote to some of the shortcomings that lead to the collapse of FTX, I believe we’ll see a great deal of collaboration and progress in this space.
With the right data, tools, guidance, and partnerships, the cryptocurrency industry can hold its businesses and people accountable to protect consumers by design — through its inherent transparency. No other sector of the crypto ecosystem embodies transparency more than DeFi, where all transactions are visible and the code behind protocols is in the open for all to see. The entire crypto industry should strive for this level of transparency. There are clearly opportunities to bridge off-chain data on liabilities with on-chain data to provide better visibility. And when more value moves onto the blockchain, potential risks will also be more transparent.
This moment is an opportunity to take stock of our values and advocate for a better, safer ecosystem. Fundamentally, there is huge demand for new models of ownership in the economy. Crypto is a cross-border, instantaneous, and cheap way to exchange value, and I believe the demand for that is only going to increase. Now, in 2023, is when a better future will be built. It’s times like these — bear markets — when changes in crypto technology happen.
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