Twelve out of 15 of the most popular decentralized finance protocols still have access to a ‘God Mode’ admin key, according to data on review platform DeFi Watch.
These full-access controls allow developers to modify or replace the smart contracts underpinning their projects, including making adjustments to user balances.
While admin keys have been justified as a way to protect users’ funds and are often used with security features such as timelocks and multi-sigs, analysts argue this calls into question exactly how “decentralized” these projects really are.
In a YouTube video posted on September 24, “Mastering Bitcoin” author and educator Andreas Antonopolous defined a truly decentralized project as one that does not have custodial control over the funds:
“That’s a very important criterion. I think that’s the foundational criterion.”
By that standard, most protocols fall well short. Of the fifteen projects reviewed on DeFi Watch, only InstaDapp, MakerDAO, and Uniswap are reported to have no admin keys associated with their product. The remaining projects — which include Aave, Compound, DDEX, Yearn Finance, Nexus Mutual, and Synthetix — all have admin keys allowing varying degrees of control.
Aave’s admin key, which is owned by an Aragon DAO consisting of just five members, only requires three “yes” votes to make sweeping protocol changes. Aave currently sits third among all DeFi projects by total value locked (TVL) with more than $1.38 billion locked.
However, several projects, including Compound, have implemented security features to protect the integrity of the admin keys, and many projects have plans to migrate to fully decentralized governance system sin future.
While many users have suggested that Aave and other projects have been upfront about their admin keys, DeFi Watch founder Chris Blec believes that DeFi protocols need to be explicit if they retain the option to enter God Mode:
It takes far too much digging for a user to find that info.
It needs to be front and center.
— Chris Blec (@ChrisBlec) September 23, 2020
Blec added that even when project acknowledges that an admin keys exist, few clearly outline the ramifications. For example, nowhere “does it say ‘Aave can change your account balance’ or ‘Aave can replace all code with new code.’”
Aave’s website states all funds are held in non-custodial contracts and has an opaque warning:
“Aave will keep ownership of the protocol in these early days in order to ensure that the protocol remains secure if any issues arise.”
Synthetix smart contracts are similarly fully upgradeable via the admin key, with DeFi Watch stating that the core team possess “vast power to do just about anything, including adjusting user balances and draining funds.” Despite Synthetix’s core team acknowledging that the project is highly centralized, the protocol has attracted more than $590 million in assets from the DeFi community.
Uniswap does not have any admin keys, however blockchain analytics firm Glassnode, suggested in a report this week that the DeFi project has essentially created their own equivalent backdoor through the distribution of their UNI governance token.
According to Glassnode, the team potentially has immediate access to almost 40% of the entire supply, which is over double the amount currently held by the rest of Uniswap’s community. With UNI tokens facilitating project governance, including access to the project’s Treasury, this would put them firmly in control of a decentralized protocol.
DeFi Watch states that trustless protocols are something of a mirage at present and in the end, security comes down to the project team’s competency:
“The only way that you can truly feel secure while using these DeFi products currently is to trust in the competency of the team and their ability to secure their admin key.”
$1 Bitcoin investment beats gold and stocks despite 2020 gains
In a knock to gold bugs, data shows that despite gold’s run this year, Bitcoin still trumps every macro asset when it comes to investment profits.
Bitcoin “quietly eating the financial world”
Fresh off its second best quarterly close on record, Bitcoin is up almost 50% in 2020, while gold has managed just half of that — 25.6%.
The S&P 500, an index with which Bitcoin has shown considerable correlation, is just 5.5% higher than at the start of January. Despite its increasing strength, the U.S. dollar has netted savers just 2.2% year-to-date returns, while oil is the big loser, with WTI crude down by almost 35%.
Bitcoin versus gold historical chart. Source: Skew
For popular statistician Willy Woo, zooming out to examine Bitcoin’s returns versus gold since the cryptocurrency’s inception in 2009 compounds the case for holding BTC.
Gold’s having its best year since 2010. This how it’s doing against BTC.
$1 invested on 6 Oct 2009 (when BTC was first priced) would be worth $13.9m today.
Bitcoin’s software is quietly eating the financial world. pic.twitter.com/eE6xQ5NYFG
— Willy Woo (@woonomic) October 6, 2020
The numbers would appear to speak for themselves. $1 of Bitcoin purchased even one year ago would have netted its owner $0.31 profit, while gold would have got $0.27.
Prior to the end of 2017, when BTC/USD began consolidating after reaching $20,000 all-time highs, the differences are much more palpable. $1 invested five years ago is now worth $44.43, while $1 of gold is worth $1.67, according to Woo’s figures.
United States’ national debt hits $27 trillion
As Cointelegraph reported, Woo has stated that he believes Bitcoin will soon decouple from gold and other traditional markets to carve out a price trajectory of its own.
The cryptocurrency has weathered criticism from gold bugs as much as ever during 2020’s market volatility, with serial gold bug Peter Schiff among its most vocal naysayers. Schiff has toned down his skepticism in recent weeks, focusing on the U.S. dollar and the state of the country’s economic debt.
U.S. total debt has now passed $27 trillion for the first time in history, according to the U.S. National Debt Clock.
“The National Debt just past $27 trillion, up about $7 trillion since Trump took office. If [Donald Trump] serves just one term he will likely add more to the national debt in 4 years than Obama did in 8,” Schiff wrote on Oct. 6.
“What’s worse is that [Joe Biden’s] 1st term may add more than both combined.”
DBS and Standard Chartered to launch blockchain platform to curb trade finance fraud
The Singapore-based multinational banking entity DBS and Standard Chartered have completed the proof-of-oncept of their blockchain trade finance platform called the Trade Finance Registry.
The two entities developed the PoC in collaboration with 12 other banks on top of the blockchain platform of Singapore-headquartered company dltledgers.
dltledgers told Cointelegraph that the banks involved in the project now intend to launch the platform for commercial use by central banks around the globe.
While the platform will first be used by the Monetary Authority of Singapore, the entities involved in the project also plan to propose it to central banks from the United States, United Kingdon, Thailand, United Arab Emirates, India, Hongkong, Qatar and Indonesia.
Backed by Enterprise Singapore — a government enterprise under the Ministry of Trade and Industry — and the Association of Banks in Singapore, the trade finance platform is expected to help banks fight fraud in lending and commodity trade.
According to dltledgers founder Samir Neji, the platform uses the company’s blockchain-based TradeDoc Validation Registry to help banks detect fraud in real-time.
DBS and Standard Chartered said in a statement that the pilot test helped reduce the chances of duplicate financing from different bank lenders for the same trade inventory. This, they added, will lead to greater trust and confidence among banks and traders.
This is only the latest effort by DBS in using blockchain to digitize trade finance. Only four months ago, the bank joined the blockchain network Contour, built over R3’s Corda, in order to modernize processes for the settlement of letters of credit.
Port of Rotterdam testing blockchain and AI for renewables trading
The Port of Rotterdam’s blockchain subsidiary, Blocklab, has been trialing a decentralized electricity trading system to help lower costs and optimize the use of renewables on its microgrid.
The system, called Distro, has been jointly developed by Blocklab and S&P Global Platts, and has been operational as a trial for two months.
Distro uses blockchain technology, smart contracts, and artificial intelligence to support the decentralized and high frequency trading of renewable energy by commercial consumers looking to optimize and manage their energy use. It matches demand with the intermittent power generated from different sources, specifically solar and battery storage.
Each market participant is allocated an AI energy trading agent that learns their behavior, choices, and needs and provides them with energy at the optimal price. Buyers and sellers can access localized and dynamic prices for energy and the system is designed to deter excessive power consumption when generation is low by offering lower prices when the supply is abundant. Blocklab says this builds upon “proven practices in commodities and financial market[s],” optimized through AI to automatically balance supply and demand.
The trial involved 20 million blockchain-validated, cleared and settled transactions, which cumulatively lowered the cost for commercial users by 11% and improving local renewables producers’ revenues by 14%.
Significantly, use of the system increased the consumption of on-site solar generation by 92%, which Blocklab argues can help to combat energy waste. Most ambitious is the claim that Distro could ostensibly help enterprises to deliver a “carbon reduction saving of up to 30 million tonnes.”
The Port of Rotterdam’s director of new business development and portfolio, Nico van Dooren, said:
Balancing local electricity needs with local generation holds the key to unlocking significant grid infrastructure savings. We are excited about the prospects of scaling this solution and the meaningful contribution it can make towards helping The Port of Rotterdam become carbon neutral by 2050.
Smart contracts are used in the high frequency trading system in order to enforce market rules, validate transactions, and manage digital identities. The immutable and transparent properties of blockchain, combined with provisions for privacy and cryptographic verification, will hold up to industry audit requirements, write Blocklab and S&P Global Platts.
A banking environment for virtual accounts used for transfers in the marketplace was provided for by ABN AMRO’s Banking-as-a-Service sandbox.
As Cointelegraph has previously reported, the Port of Rotterdam is no stranger to blockchain technology. This summer, the port launched a pilot to tokenize traditional shipping PINs, and has also been one of the major international ports to become involved with the blockchain logistics platform TradeLens.
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