This site uses cookies. Browsing the site, you agree to the use of cookies. If you need more information, please visit the Cookies Policy page

Русский

English

Enter / Registration

Cryptocurrencies: 9505 / Markets: 114717

Market Cap: $ 3 663 340 658 986 / 24h Vol: $ 222 537 540 211 / BTC Dominance: 58.861607907734%

Н News

How Escape Hatches Can Boost Crypto’s Reputation

As the impending changes in Washington and the associated jump in token prices have us all gripped, there's another defining moment happening right now in crypto that demonstrates blockchain’s true power. It’s a development that Vitalik heralded on stage at Devcon Tuesday, which could completely reshape how we protect our money in times of crisis, achieving what generations of bankers and lawyers have struggled to do: ensure a smooth, swift return of funds to users when a financial platform shuts down.Imagine a multi-million-dollar financial application closing its doors, yet every user (as unsecured creditors in the same pool) retrieves their money instantly, without hassle or third-party intervention. That's exactly what happened when the crypto platform dYdX shut off its Ethereum-based operations with $70 million of user funds inside it — only to seamlessly return millions of dollars to its users. No drawn-out legal processes, no waiting periods — just immediate access to funds, as simple as pressing a button.Unmute Record $1.38B U.S. Bitcoin ETF Inflows on Trump Win, Fed Rate Cut

02:38'High Likelihood' Cardano Founder Charles Hoskinson Will Become Trump's Crypto Advisor01:42Bitcoin Hits New $76K Record High, ETFs Post $620M Inflows02:41Bitcoin's New All-Time High; U.S. BTC Reserve Hopes Fly16:22Bitcoin to Reach $100K by December or January: 10x Research FounderI’ll give an insight into the cheat-proof feature that achieved this — the Escape Hatch — and outline just how wide its use cases can be. But first, some perspective on why this is a story of blockchain’s relevance for the future of finance, and not just another story of Web3 inside baseball.

This ongoing claims process can be monitored on any Ethereum block explorer and it’s a game-changer for anyone who's ever worried about losing access to their money during a banking crisis or insolvency. Traditionally, in these cases, financial systems often entangle consumers in lengthy, complicated proceedings when things go south. The first use of the Escape Hatch — an event that is ongoing right now — will be recalled as a watershed moment when companies outside of crypto started to appreciate the unique ability of blockchain rails to win consumer confidence.The Escape Hatch was designed and hardwired into the scaling infrastructure that dYdX was using on Ethereum – StarkEx, which my company StarkWare built and operates. It is a failsafe mechanism to ensure that, in the case of any disruption, funds are accessible to their rightful owners via the Ethereum main-chain (L1), free from administrative red tape and time limits.

Think of any scenario that could normally part you from your funds — the company where you deposit goes bankrupt, is shut down by a government, or aliens abduct its entire staff. The Escape Hatch was built to be exactly what the name suggests — you can open it up and take out your funds. And, on October 28, when dYdX went offline on Ethereum, it worked exactly as intended.The Escape Hatch can be, and should always be, hardwired into blockchain technology, allowing users to withdraw their assets directly. In dYdX’s case, it was hardwired into its setup on L2. It could equally exist on L3 or, for that matter, L99 if the model of blockchain layers expands prolifically in future. It can work for fully decentralized projects, partly decentralized projects (dYdX used a centralized order book and matching system), or centralized entities operating on blockchain. Ethereum co-founder Vitalik Buterin enthusiastically explained the mechanism in his Devcon keynote address today.

He said: “The difference between a Layer 2 and an independent chain is that even if your Layer 2 gets 51% attacks, or 91% attacks, or the team shuts down, Layer 1 still stands there to protect the users. Users are able to prove their assets and their ownership and their state inside of the Layer 2 and migrate it back down to layer one.”Vitalik then went on to state that “recently, there was a live experiment of this,” discussing the case of dYdX. The audience, impressed by the significance of what he was saying, erupted into spontaneous applause.Vitalik hammered home the point, saying: “Layer 2s are not just multisigs. The ability to actually move your assets out of Layer 2 and back to Layer 1, if the Layer 2 fails, without the Layer 2 team’s involvement, is not just theory. It is reality.”

Observers will quickly start to realize the Escape Hatch isn’t just a “neat” feature of blockchain. It’s a powerful illustration of why those outside of the blockchain space, whose interest is piqued by the current mood of market exuberance, will find real potential benefits of moving at least parts of their operations on-chain.All of us who are already in crypto are now in the spotlight, and it’s time to seize it. We have a rare opportunity to capitalize on the attention, take people beyond the headlines, and highlight our relevance. We often find ourselves giving a nail-in-search-of-a-hammer argument for blockchain. The Escape Hatch story is the opposite.

Anyone trying to retrieve money in the aftermath of a bank shutdown or an insolvency knows how excruciating it can be. It’s a perfect example of an area in which, if blockchain can do things better, market forces will ensure that people will want to listen (except for the insolvency lawyers who invoice in their six-minute increments and get paid before creditors).This type of shutdown on a traditional platform would likely lead to a prolonged distribution process managed by a singular entity. Not only would the process be lengthy, but it would likely be prone to human error.Even if such a distribution of funds were to go smoothly, it’s entirely possible that customers miss letters or fail to meet deadlines for claiming funds and therefore lose money. As things currently stand, almost every claims process has time limits, after which your money can go to someone else. Money from an emergency release, however, would remain on the blockchain, accessible only by its rightful owner or their descendants, forever.

The use of a failsafe mechanism, where a smart contract distributes funds based on predetermined parameters, could be implemented for a range of consumer use cases and potentially even circumvent or streamline future insolvency proceedings. Blockchain is not here just to make life simpler, richer, more global or more fun – though it can do all of those well – but to increase the integrity level of our interactions. If that most perplexing and troubling of financial realities, liquidation, can be performed in an automated manner in accordance with unmovable and predetermined criteria in line with relevant law, that is a triumph for integrity.

The moment that a business starts operating on blockchain in this way, matters are handled according to predetermined ground rules that are in the code. The business doesn’t need to try to convince consumers that it will do the right thing in the event of catastrophe; the code of the blockchain has their back. Integrity has never been so accessible.The crypto industry has a bad reputation. Time and time again, it has been embroiled in scandal. A seemingly never-ending stream of negative news stories has seen consumers hurt by bankruptcies, thefts, and the misappropriation of customer funds. It’s gotten to the point where roughly six-in-ten Americans say they have little to no confidence in the current ways to invest, trade or use crypto, per Pew Research Center.

Two years on from the collapse of the centralized crypto exchange FTX, dYdX has demonstrated what blockchain can do when a platform truly embraces “self-custodial” values. We need to become better at communicating to the general public that applications such as FTX were simply masquerading as blockchain applications, with no regard for customers. By stark contrast, others, such as dYdX, exist for the very purpose of better protecting consumers.In the case of FTX, there were many reports of staff front-running customers to quickly remove their funds from the platform. This simply could never have happened with dYdX due to the codebase — scaled on Ethereum by my company, StarkWare — which kept all customer funds ring-fenced. Consequently, had a dYdX staffer tried to steal funds, it xfwould have been impossible.

Today, when we get into a car, we all fasten our seatbelts. In the United States alone, it is estimated that seatbelts have saved almost 400,000 lives. And yet, when Ford first offered seatbelts as a feature in 1955, they were unpopular: in 1956, only 1 in 50 people paid for them.It didn’t matter much to the success of Ford. After all, people needed cars, and weren’t discouraged by safety factors. By contrast, those of us in blockchain today desperately need to convince people to use this technology, show its relevance for previously unimagined use cases, and reassure them it’s safe to do so. In other words, welcome to crypto — your Escape Hatches are located here, here, here and here. Enjoy the ride.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.Edited by Benjamin Schiller.

Source

Н News

How Escape Hatches Can Boost Crypto’s Reputation

Similar news

Hodl or take profits? Bitcoin bear market cycle started at $126k

Elon Musk: ‘You can’t fake energy.’ Has Bitcoin finally gone green enough for Tesla?

Bitcoin risks falling under $100,000 as Trump confirms US-China tradewar

Why is Bitcoin trading below $110,000? Everything that happened in crypto today

Can Bitcoin hold the line as $1.8B in realized profits hits the market?

XRP Tries to Reclaim $2.50 as Ripple Broadens Payment Rails in Africa

Н News

How Escape Hatches Can Boost Crypto’s Reputation

Similar news

Hodl or take profits? Bitcoin bear market cycle started at $126k

Elon Musk: ‘You can’t fake energy.’ Has Bitcoin finally gone green enough for Tesla?

Bitcoin risks falling under $100,000 as Trump confirms US-China tradewar

Why is Bitcoin trading below $110,000? Everything that happened in crypto today

Can Bitcoin hold the line as $1.8B in realized profits hits the market?

XRP Tries to Reclaim $2.50 as Ripple Broadens Payment Rails in Africa

Stay in touch