Highlights of “Litentry & Friends” First Episode: Unleash Full Capacity of DeFi
“Litentry & Friends” is a Youtube live show hosted by the Litentry team that focuses on sharing knowledge about decentralized identity. In each panel, we will invite top project partners to discuss and share their insights on the industry, the context of the collaboration, and the outlook for Web3.
In the first episode, we have invited Irene Zhao from Konomi Network and Lilly M.Dobreva from Litentry to talk about how DID empowers DeFi and unleashes its full potential.
Hi everyone, welcome to our very first episode of our brand new youtube AMA series Litentry & Friends. My name is Jacky, director of growth from Litentry. I am really excited to be the moderator of this event, and I’m thrilled to be joined by two beautiful, smart ladies in the crypto world. I think we’re all very lucky to hear their opinion on a number of interesting topics cause both teams are building something really exciting. First, it would be great if you could briefly introduce yourself and your project to the audience. I guess we’ll start with our guest Irene. Welcome!
Hi everyone, this is Irene. I’m the CMO of Konomi where I’m driving marketing, social media advertising and community effort.
Konomi is a full suite asset management solution for cross-chain crypto assets. Using Substrate as the development framework, the network aims to support more assets in the Polkadot ecosystem. Users could manage their crypto holding positions, trade assets, and earn interest through decentralized money market products. Konomi also issues its native network token in order to kick start liquidity and decentralized governance.
I’m Lilly, CPO at Litentry. Litentry is a fast-growing team based in Berlin and China, we focus on building a decentralized identity aggregator that links user identities from different networks. Our protocol enables easy access to integrated identity data on the Web3 network, and also guarantees reliability, security, and integrity of the data.
DeFi has developed over the last year, is there anything you find surprising, and what could be improved?
There is a lot going on in DeFi within the past 1 year or 2, there are many things that surprised me. And for me, the biggest highlight is really how fast and far the liquidity mining went. It was just the Compound and their liquidity mining scheme, but it really kicked this off in a big way. And of course, there are a bunch of fast followers after that. Especially Uniswap and Sushiswap, being able to trade all these new assets and acquire liquidity and volumes at such a rocket speed. You can see we have all this mature infrastructure, basically an entire finance world including lending, derivatives, insurance, synthetic assets, dex aggregator, asset management, etc.
Areas to improve could be lack of fiat entry, scalability, better usability, user friendly interface and capital efficiency. But I believe DeFi is still young, we have the best mind in the world, and I look forward to the future, how defi would become when all these current problems are resolved.
What surprised our team most this year is the speed of the development of structured products in the DeFi market.
DeFi structured products are currently mainly the development of structured financial derivatives, that is, linking one or several underlying assets, such as Callable Step-Up Note with death put or Credit Linked Notes in traditional financial products.
The advantage of this is that besides enriching the products of the DeFi ecosystem, it also enables the participants of the DeFi ecosystem to hedge their risks through these products, thereby reduces the margin and increases the value of collateral.
Our team believes that the most critical problem that DeFi faces at the moment is how to authenticate users under the premise of decentralization. The entire DeFi market is currently unable to authenticate users’ identities, so the platforms are forced to increase the mortgage. The product margin ensures the security of the platform but at the same time reduces the efficiency of asset flow. and there is a large amount of funds flowing into the DeFi market for illegal operations such as money laundering and tax evasion, which also increases the regulatory risk. Therefore, we believe a good decentralized identity authentication system is of utmost importance to the DeFi ecosystem.
What do you think is the main difference between traditional finance borrowing and DeFi borrowing?
In a nutshell, the biggest difference between traditional finance and DeFi is that DeFi completely eliminates financial intermediaries such as banks and brokerages. It is true that financial intermediaries has improved financial efficiency. However, as a party that can obtain more information via information asymmetry, traditional finance might always have an incentive to use information asymmetry to obtain extra profits, which causes the recurrence of financial crisis
One the other hand, DeFi makes it possible to eliminate financial intermediaries. It takes the advantage of the transparency and immutability of the blockchain, so that users’ assets can still be protected after the removal of financial authorities.
One of the big difference between Defi and traditional finance is capital efficiency, when two counterparties in the market do a large position, either a loan or a derivatives position with each other usually they don’t have to put up a full collateralization, or even over-collateralization, cause you have these fractional reserve systems. You have margin, trades, you have leverage that’s baked into most of these kinds of positions. To me a big unlock for defi is like solving this exact problem. We believe on-chain identity is the ultimate solution for DeFi evolving.
Tell us about the details of the partnership? What’s your thoughts?
The objective of our partnership is to target the issue we just discussed, providing more flexibility and preferential treatment to DeFi users, and at the same time ensure data security and privacy.
Under this partnership, Litentry’s on-chain identity aggregation data and credit computation model will bring value to Konomi as we explore new ways to adjust and integrate collateral rates, as well as credit scores based on a user’s verified on-chain identity.
Also, this credit score will be derived from sophisticated algorithms with variables such as average loan repayment period, leverage ratio, credit utilization ratio, net asset value, risk preference, etc.
Litentry has developed a couple of decentralized identification-focused products. Konomi will utilize Litentry’s decentralized credit rating model and extensive data to achieve more significant insights and outputs through this collaboration.
Our collaboration with Litentry will undoubtedly bring more value to Konomi users as we explore new ways to adjust and integrate collateral rates, as well as credit scores based on a user’s verified online identity.
As an interoperable platform with many of the currently available DeFi infrastructures, this integration will make it easier for Konomi users to efficiently utilize other DeFi platforms that require enhanced KYC or AML regulations from their user base. As Lilly just mentioned, that Konomi will utilize Litentry’s decentralized credit rating model and extensive data to achieve more significant insights and outputs. And our first use case we will implement will be around user credit scores and how we can adjust collateral rates based on the individual user. However, we believe this is just the tip of the iceberg. Litentry offers many exciting capabilities, and we will continue to work with them to add more value to the Konomi network
What’s your view on on-chain privacy and security? How is Litentry addressing this issue? (From Twitter comment)
First of all, by saying identity we are not talking about traditional KYC information. So you won’t be able to get any information like personal id, age, geographical location of your counterparty whatsoever. Information we extract, index, and providing computing analysis will be those left on-chain, for example you liquidity providing history, borrowing history or how active you are in the governance, these are all open information.
And on top of that of course security and user privacy are of vital importance. Litentry fully complies with the w3c DID standards and we implement decentralized storage. Our network doesn’t store users’ identity data except for the encrypted account-DID relationships and the rest of the data will be returned to the user in real-time. Data stored on-chain are under encryption; equipped with ID obfuscation technology to hide the owner’s ID. Litentry doesn’t make the decision when it comes to data sharing. It’s totally up to users to share their personal information.
Besides we are actively working closely with privacy solution providers Zcloak and Automata to explore ways such as zero-knowledge proof and on-chain diffuser system to ensure users’ data is fully protected.
I am interested in Konomi’s user experience compared to the existing money market protocol out there, how does Konomi team ensure the end-to-end experience is powerful and distinct?
First of all, compared to other DeFi lending platforms, Konomi has lower transaction fees and liquidation penalties. Secondly, benefiting from Konomi’s good economic model and risk control system, our collateral prices will be on average about 5% higher than other platforms. Last but not least, we have from the outset designed our system to make sure it’s easy to use, especially for users who are new to Defi. Any new user only needs to spend about 20 minutes to become proficient at using most of Konomi’s functions.
In terms of product, what is the experience you know, what is the thing that’s going to drive product-market fit?
We believe that products should serve humanity. they should improve our life, give us convenience without necessarily surveilling users for the sake of being profitable. Litentry aims to preserve user interests including privacy, data security, decentralization in infrastructure to provide an alternative option for identity-data owners. It’s when we place the user needs at the heart of our products, then we’ll find a way to truly empower them and we believe product/market fit will follow.
Where is Konomi project going? Let us know when your project will have a product for its users? (From Twitter comment)
We have our lending module ready but we can only launch our main net when Polkadot goes live after the Parachain slot auction. As for now, we do not have the intention to migrate our product to other public chains yet. We will monitor the progress of the Polkadot Parachain slot auction carefully and make sure we are well prepared for it. Our target is to become the first 10 projects that secure a Parachain so hopefully, we can launch our mainnet within 2021.
Why did Litentry choose Polkadot system? (From Twitter comment)
There are a couple of reasons: the historical context is that back in the early days of our project, we were using Ethereum to build applications which are heavily subject to transaction fees and long duration time. It wasn’t a particularly good experience for both users and developers, so we started to look for alternative products. We believed that cross-chain will be the future of blockchain, and after comparing different projects ex. Cosmos, Polkadot, we decide to move forward with Polkadot.
Polkadot has fast iteration, cutting-edge technology, and high potential in the cross-chain space. It has a vision of helping people build entire blockchains and integrating these blockchains with each other. The CTO Gavin Wood also has a deep understanding of Web 3 and the blockchain application ecosystem. With Polkadot, we find it relatively easier and more efficient to build our protocol related to building from scratch.
Future plan of each project? (From Twitter comment)
We are currently working on something called My Crypto Profile which enables users to prove the ownership of their NFTs and addresses. We will release it in the coming weeks so stay tuned. We are also exploring the idea to create a common-good identity parachain for Polkadot and Kusama. Hopefully, we can share more about that soon.
We are now developing our governance module so that we can modify on-chain parameters based on feedback from Konomi community. At the same time, we are looking into crowdfunding modules as well as better currency management for our parachain. We also have discovered possibilities of enhancing our liquidation model, which we will be doing after as well. Anyways, there are plenty that we are working on, please stay tuned for the updates.
Thank you so much for sharing your thoughts and it’s all super impressive and I’m really grateful there are smart teams like yours really putting together a product that is going to make a difference in the space. And that’s going to open people’s eyes to what blockchain and smart contracts can really do, separately from simply generating tokens. So thank you so much for discussing here with me today and Irene thank you so much for being our first guest in the Litentry and Friends series. Looking forward to seeing you again soon, hopefully in person. And don’t forget to join our telegram community, follow our Twitter and subscribe our channel. See you!
Litentry is a cross-chance Decentralized Identity (DID) Aggregator that enables the linking of user identities among multiple decentralized networks. Built on the Substrate framework and featuring a DID indexing protocol, Litentry provides a decentralized, verifiable identity aggregation service that removes the redundancy of code and the hassles involved in resolving agnostic DID mechanisms. Litentry’s DID Aggregator is compatible with all DID standards, and powered by a reliable DID data interface. Everyone can build and submit DID methods to Litentry, making identity data easily accessible in the Web3.0.