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Decentralized Finance: Benefits Of Crypto Powered Finance Over Traditional Banking

May 5, 2023
Smart Investor
5 mins read

The recent collapse of Silicon Valley Bank (SVB) triggered mass panic in which the contagion effect has unfurled ramifications across the traditional finance industries. One of the main reasons in the SVB post-mortem is the lack of advanced cutting edge technologies for risk and  regulations in the fintech sector. 

In light of SVB and the FTX collapse, people started flocking to DeFi (Decentralised Finance) platforms. The recent collapse of FTX and bank runs actually underscores the need for a more decentralized financial system. When centralized institutions fail, there is no safety net to protect investors. DeFi distributes the risk across a network of users and smart contracts, making it less vulnerable to individual failures. traditional banks started to feel the pressure. 

They realized that they needed to adapt or risk becoming obsolete. They started to explore the use of blockchain technology and DeFi, incorporating these systems into their existing infrastructure. 

In other words, the collapse of FTX and the subsequent bank runs marked a turning point for the banking industry. It showed that traditional banks were no longer the only option for financial services. DeFi offered an alternative that was transparent, secure, and accessible to everyone. And as more people embrace this new system, the future of banking looks brighter than ever. 

Smart Investor recently interviewed Terrence Hooi, CEO and Co-Founder, Singular Technologies to find out more about this topic. But before that, let’s begin by understanding more about non-custodial DeFi.

Terrence Hooi, CEO and Co-Founder, Singular Technologies

Non-Custodial DeFi 

Non-custodial DeFi does not require regulatory controls because it is designed to be trustless and decentralized. Unlike centralized financial systems, where a central authority controls the flow of funds and is responsible for ensuring compliance with regulations, non-custodial DeFi operates on a peer-to-peer basis without intermediaries. 

In non-custodial DeFi, users have complete control over their funds and can transact directly with each other using smart contracts. These contracts are self-executing and enforceable, meaning that transactions are executed automatically without the need for human intervention. 

Since there is no central authority or intermediary involved, there is no need for regulatory controls to ensure compliance. Instead, the rules of the system are built into the code of the smart contracts, which are transparent and auditable by anyone. But again, Singular wants to actively work with regulators like DFSA and MAS Singapore. 

Additionally, non-custodial DeFi is designed to be permissionless, meaning that anyone can participate in the system without needing permission from a central authority. This makes it more accessible to a wider range of users and reduces the potential for discriminatory practices or exclusionary policies. 

Overall, non-custodial DeFi’s trustless and decentralized design makes it less vulnerable to fraud, hacking, or other forms of malfeasance that regulatory controls are designed to prevent. Instead, its transparent and auditable nature allows the system to self-regulate and enforce compliance with its own rules. 

Singular Technologies recently launched a new institutional grade atomic settlement platform – aptly called “Singular” – that is built on decentralized finance (DeFi) infrastructure. Atomic settlement is a technology that allows for simultaneous execution of multiple transactions or exchanges, reducing the risk of failed transactions or malicious attacks. 

Singular’s DeFi platform has been recognized with numerous awards, including the Bold Awards 20’ Europe, Top 10 Fintech Startup, APAC, StartupWorldcup Regional Top Winner 22’, Alibaba Cloud Innovation Awards 22’, and ORIGIN Web 3 Top Disruptor 22’. 

Smart Investor: What is the outlook on Stablecoins with looming recessionary and geopolitical pressures? 

Terrence Hooi: With regards to the outlook on stablecoins in the face of looming recessionary and geopolitical pressures, there are a few different factors to consider: 

1. Potential for increased demand: During times of economic uncertainty, people may turn to stablecoins as a safe haven asset. This could lead to increased demand for stablecoins, which in turn could drive up their value. 

2. Potential regulatory challenges: Stablecoins are still a relatively new and unregulated asset class, and regulators may become more concerned about their potential to destabilize financial systems during times of crisis. This could lead to increased scrutiny and regulation, which could impact the growth of the stablecoin market. 

3. Impact of inflation: If the recessionary pressures lead to high inflation, stablecoins could become more attractive to investors as a hedge against inflation. However, if stablecoins are not properly backed by assets, they could lose their peg and become vulnerable to inflation. 

4. Geopolitical risks: Geopolitical risks can have an impact on the value of stablecoins. For example, if a country decides to ban the use of stablecoins or restrict their circulation, this could lead to a decrease in demand and value

SI: Why did you and your co-founders decide to launch this product? What are 3 pain points or areas that Singular Technologies’ product addresses which other digital banking solutions or cryptocurrencies do not? How are you unique? 

TH: The current state of DeFi Apps are notoriously complex to use and it is not a skill everyone can master. One of the main challenges facing DeFi today is the accessibility and scalability with subpar UX. 

The very wealthy have always been able to afford to pay expensive money managers to manage and invest in Crypto, but financial APIs and DeFi in the late ‘Tens’ let Singular extend a similar service to people with a ~$10k net worth instead of ~$5M using Distributed Ledger Technology for the unbankable in emerging markets. 

The current financial system is slow and expensive. For example, if you look at global remittances today using ACH or SWIFT, it is often slow and expensive ~2–3 days. Compared to stablecoins like USDC, which maintains a peg to the US dollar, it takes ~3 minutes without relying on any intermediaries. 

Singular (SD) is an all-in-one banking and financial services platform for cryptocurrency users. Singular aims to outperform banks using the best elements of DeFi. 

SI: Which markets are you currently active in? Any new entries planned in the near term? How has MRANTI assisted you in growth and expansion plans? 

TH: US, Singapore & Japan. Japan have always been a hub for innovation, and we are excited to be a part of this thriving community with the help of MRANTI & MaTrade. Our new office will allow us to provide even better support and services to our Japanese users, as well as to collaborate with local partners and experts in the DeFi space. 

The Founding team has expertise in building institutional-grade Crypto Exchanges capable of processing 2 million orders per second and building decentralized finance platforms for institutions. 

SI: How is your new product purpose-built to promote financial inclusiveness ie banking of the unbankable? 

TH: One of the key features of our platform is that it allows users to easily convert between traditional fiat currencies and cryptocurrencies. This makes it easy for users to participate in the global financial system and take advantage of the benefits of decentralized finance. 

Our platform is different from traditional financial institutions in that we do not require users to have a traditional bank account or credit history. Instead, our platform is designed to be user-friendly and accessible to anyone with a smartphone and an internet connection. This is particularly important for the unbankable, who may not have access to traditional financial services due to a lack of documentation or credit history. 

SI: So how does a person “buy” a stablecoin / Singular Token? What’s the minimum sum / volume or amount? 

TH: Min can be as little as RM 100 and can it be traded, exchanged, borrowed, lent to only those w “stablecoins” or is it open to participate in any other crypto exchange? 

We’re currently working with an internationally compliant fiat-gateway Xanpool, to allow users from Indonesia, Malaysia, Singapore , Hong Kong, Thailand, Vietnam, south Korea, India, Philippines to easily use a bank account or CC to purchase Stablecoins like USDC or major cryptos like BTC and ETH. 

SI: How do you ensure that your stablecoin remains stable and maintains its peg to the underlying asset, especially during periods of market volatility? 

TH: The potential benefits of Stablecoins like USDC or Tether, which are now available on the Singular App. One of the key advantages of Stablecoins is their ability to maintain their peg to the underlying asset, even during periods of volatility. 

Assets backed by USDC for instance are registered with FinCEN and regulated by 46 regulators. This is particularly important in the context of decentralized finance (DeFi), where users are increasingly turning to Stablecoins as a way to mitigate the risk of market fluctuations. 

By providing users with access to Stablecoins, platforms like Singular App are helping to make DeFi more accessible and user-friendly for a wider range of users. 

Stablecoins like USDC or Tether are designed to maintain their value through a number of mechanisms, such as backing the coin with a reserve of the underlying asset or using algorithms to adjust the coin’s supply in response to changes in market conditions. 

This ensures that the value of the Stablecoin remains stable, even in the face of market volatility. In addition, Stablecoins can be used for a wide range of purposes, such as trading on decentralized exchanges, paying for goods and services, or as a store of value. This versatility has made them increasingly popular among users who are looking for a reliable and stable alternative to traditional cryptocurrencies. 

Overall, the availability of Stablecoins like USDC or Tether on the Singular App represents a significant step forward for the DeFi industry. By providing users with access to Stablecoins, platforms like Singular App are helping to make DeFi more accessible and user-friendly for a wider range of users. 

SI: Can you explain the process of creating and redeeming the stablecoin, and how do you ensure that the collateral backing your stablecoin is secure? 

TH: The process of creating and redeeming Stablecoins on the Singular App is relatively straightforward. To create Stablecoins, users can deposit the underlying asset (such as USD) into a collateral pool on the Singular App. 

The app then mints an equivalent amount of Stablecoins, which can be used for trading or other purposes within the platform. To redeem the Stablecoins, users can simply exchange them back for the underlying asset in the collateral pool. 

To ensure the security of the collateral backing of the Singular token, the platform uses a number of mechanisms. One of these is a smart contract that is designed to automatically liquidate collateral in the event that its value falls below a certain threshold. 

This helps to ensure that the value of the collateral backing the Singular token remains stable and secure. In addition, the platform uses a combination of on-chain and off-chain mechanisms to monitor the value of the collateral pool in real-time. This helps to ensure that the collateral backing the Singular token is always sufficient to maintain the value of the token. 

As Singular continues to develop its platform, it plans to roll out its own native token that is privacy-based. This token will be backed by a collateral pool, similar to the Stablecoins, and will provide users with even more flexibility and functionality within the decentralized finance ecosystem. 

Overall, the use of Stablecoins on the Singular App represents a significant step forward for the decentralized finance industry. By providing users with a stable and reliable means of transacting, Singular is helping to make DeFi more accessible and user-friendly for a wider range of users. 

SI: How do you plan to scale your decentralized finance solution to accommodate a growing user base, and what challenges do you anticipate in the process? 

TH: Singular Milestones 2023 

i.Smart Contract based Privacy Token.The Singular Token will be implemented with a smart contract that is ERC-20 compatible as well as privacy-preserving features such as zero knowledge proofs. 

ii. To ensure The Singular Token on the Singular DeFi platform is private, the privacy token will utilize zero knowledge proofs. Allowing two parties to prove the validity of a transaction without revealing any information about the transaction while maintaining the integrity of the blockchain. 

iii. To facilitate the trading of Singular Token, a KYC based decentralized exchange (DEX) will be built on Singular’s DeFi platform. Holders of Singular Token will be able to use Singular Token for zero fee global transfers, high-yield staking, and access to professionally managed decentralized assets. The platform will have robust security and compliance measures to ensure users funds are safe and secure and that the platform is compliant with regulators. 

iv. Lending and Borrowing. To enable landing and borrowing of Singular Token, users can lend and borrow the privacy token, with interest rates determined by supply and demand. The protocol will be implemented as a smart contact on the Ethereum blockchain, ensuring the transactions are completely private while operating in a completely decentralized manner. 

SI: How do you plan to handle regulatory challenges related to decentralized finance, and what steps have you taken to ensure compliance with relevant laws and regulations? 

TH: Singular aims to submit a regulatory sandbox application with the Monetary Authority of Singapore (MAS) and the Dubai Financial Services Agency. A regulatory sandbox is a testing environment that allows companies to experiment with new technologies and business models while still being subject to regulatory oversight. 

By participating in regulatory sandboxes, Singular can work with regulators to ensure that its platform meets all regulatory requirements and is safe and secure for users. It also provides an opportunity for Singular to demonstrate the value of DeFi to regulators and policymakers, potentially paving the way for broader adoption of DeFi in the future. 

SI: How do you address concerns around transparency and auditability in your stablecoin decentralized finance solution, and what measures do you take to ensure the integrity of your platform? 

TH: Every year, more money is lost in DeFi without the hackers being held accountable, resulting in a diminished sense of security with users. Currently, the largest drivers of crypto adoption are centralized exchanges (CEX) like Coinbase who integrate KYC processes. These regulatory measures issue accountability that lead to consumer confidence which DeFi currently lacks. 

The Singular DeFi platform facilitates proper regulatory compliance while maintaining privacy by adhering to critical aspects of the users identity. Singular aims to solve these two major barriers that could lead to large scale crypto adoption: 

  • Lack of accountability and security in Web 3 
  • Preserving investor privacy while interacting across DeFi protocols 

SI: How do you plan to incentivize liquidity providers to participate in your stablecoin decentralized finance solution, and what benefits do they stand to gain? 

TH: Firstly, as a liquidity provider, holders of Singular Dollar will be able to earn a share of the transaction fees generated by the network. This means that the more assets you contribute to the liquidity pool, the more fees you will earn. Our platform also offers additional rewards for early adopters and long-term holders, so you can earn even more as you continue participating in the network. 

SI: What future developments do you have in mind for Singular, and how do you see the industry evolving in the next few years? 

TH: 2023-2024 Singular DeFi platform that supports DeFi applications, including lending and borrowing protocols, automated market makers (AMMs) and decentralized exchange. The smart contracts will be written in a high-level programming language, such as Solidity, and replied on the blockchain network. 

The DeFi platform will earn revenue through fees charged on professionally managed DeFi funds programmed on a smart contract. The platform will charge a management fee for the funds under management, typically ranging from 0.5% to 2% per annum. In addition, the platform may also charge a performance fee of 10% to 20% of profits generated by the fund. 

The revenue will be used to cover operational costs, pay the management team, and generate profits for the platform. 

SI: What advice would you give to someone looking to enter the stablecoin decentralized finance space, and what key factors should they consider before getting started? 

TH: Before investing in any stablecoin or DeFi project, it’s important to research the market and understand the risks and potential rewards. This includes looking at the track record of the stablecoin, the team behind the project, and the market demand for stablecoins.

 DeFi is a relatively new and complex technology, and it’s important to have a solid understanding of how it works before investing. This includes understanding the basics of blockchain technology, smart contracts, and decentralized exchanges. 

As with any investment, it’s important to carefully consider the risks and potential rewards before making a decision. 

SI: Some transparency in terms of your reserves – how much is cash, how much is treasury? 

TH: Singular Dollar privacy token is not yet launched

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