The Case Against Ethereum
Security Risks on the Rise
DODO, the popular decentralized finance (DeFi) platform, lost approximately $3.9 million worth of tokens after being hacked earlier in March 2021. The team quickly took to Twitter to reassure holders that the tokens would be returned, and, fortunately, it later managed to recoup about $3.1 million. Only 10 days later, SIL.Finance, a DeFi project focusing on dual-token liquidity, lost $12.15 million to hackers through a vulnerability in their smart contracts. Likewise, they managed to track down the missing funds; nonetheless, the confidence of many holders was already lost.
While these two platforms were lucky enough to regather missing tokens, most are not. Even if recouping lost funds was more commonplace, incessant hackings across the DeFi space have many users wondering how safe their tokens are when held with Ethereum-based applications. According to Atlas VPN, ETH-based applications (“DApps”) were the most targeted by hackers; in 2020 alone, hackers successfully attacked ETH DApps 47 times for a grand total of $436 million.
High Gas Prices Stifle Innovation
Beyond issues of security, the cost of innovation on the Ethereum blockchain has become unsustainable. As transactions on the ETH network has grown, gas fees — the amount given to miners to validate transactions — have surged to record highs, with the average transaction fee now above $20. Such high levels, while great for miners’ pocketbooks, make it all but impossible to perform microtransactions on the network. This discourages small holders from using DApps or participating in transactions on the network, and, in turn, discourages new organizations from innovating on the Ethereum platform.
Ultimately, increasingly high gas fees undermine the overarching goal of DeFi, total value locked (“TVL”). TVL refers to the number of assets being staked into a protocol, and it is often used as a metric to gauge the sector’s health. In order for DeFi to provide strong solutions in peer-to-peer lending, remittances, and more, it requires collateral or liquidity within a trading pool. To usher in general adoption on a large scale, it will require trading pools to have very ample levels of liquidity. And, ultimately, widespread adoption is the end goal.
The KFI Solution
KFI, a new DeFi solution that aims to provide stakeholders with optimal returns through objective code-based yield farming strategies, is taking a new approach to mitigate traditional deficiencies of DeFi applications on the Ethereum network. By both choosing a stronger blockchain ecosystem in which to develop as well as offering strong security measures and governance features, KFI aims to create an inclusive environment for DeFi participants.
In light of increasing levels of security risk and cost of innovation on the Ethereum network, we at KFI are doing DeFi differently. At the forefront of our strategy is our choice of blockchain: OKChain. The blockchain — currently slated to launch later this month — is an open-source technology focused on hosting blockchain-based trading applications. Offering a higher standard of decentralization and security, OKChain provides solutions to many problems faced by its Ethereum counterpart.
To solve the high gas price issue, OKChain offers a simpler fee model, one which offers more accessibility to users moving smaller amounts of money. Users can elect to either settle a transaction cost by way of fees or gas, but not both. The fee rate is simply equal to 0.01% of the transaction total. Moreover, validators on the blockchain are enabled to select a minimum gas price. While validators may begin to prioritize transactions with a higher gas prices or fees, the mechanism in place allows greater flexibility for all types of stakeholders on the blockchain.
KFI Security and Governance
Simultaneously, the KFI application itself provides increased levels of security and control for users. Through our Vault, when interest is generated for users, the protocol will ensure that the ownership of funds still belongs to the users and will not be misappropriated by burning the private key, multi-signature requirements, time-based lockups, etc. By retaining ownership with a staking user, the protocol reduces traditionally pinpointed risks.
The KFI token that powers the protocol also implements on-chain governance, and the parameters of KFI can be adjusted by a voting contract initiative, which is based on the amount of KFI token held by voters. The on-chain governance system will help create a transparent process for updates made to the protocol, as well as allow the protocol to continuously improve upon issues of security and features that users commonly face on other platforms.
A New Future for DeFi
Don’t deny DeFi. This contemporary reinvention of traditional finance is opening the door for many underserved and underbanked. While in many ways it is more accessible than services offered by traditional financiers, issues of security, risk, and cost continue to stifle innovation in the sector. That is why we decided to blaze a new path with KFI. Stay tuned for more articles about the future of DeFi and how KFI seeks to fit into that puzzle.
KFI is the native cryptocurrency of the KFI.one DeFi protocol and serves as a governance token that allows users to vote on the direction of the protocol. Due to the protocol’s focus on automated yield farming strategies, KFI will launch on Okchain as its base token in April 2021.
To learn about upcoming events and news regarding the upcoming release, follow the project on Twitter at @kfi_one or join the pre-launch Telegram group at t.me/kfione.