At this point, the news of Changpeng Zhao’s scandal might no longer be “news”. In addition, the market has equally recovered, and everything is back to normal. In fact, the whole incident has been put behind, and no one sees the lesson that needs to be learned from it. Not even the industry experts still see the need to promote trustless blockchain systems in most projects.
Before proceeding, Tectum would like to issue a disclaimer that the sole purpose of this op-ed is educational. Tectum does not indulge in rumors and will not quote any unauthorized information flying about. The aim of this piece is to enlighten shareholders within the system of the need for trustless systems.
A few days ago, Changpeng Zhao issued a press release via a tweet stating that he would be stepping down as the CEO of the world’s most famous cryptocurrency exchange. He went further to announce Richard Teng, one of the Regional Heads, as the new CEO. Despite the incident, he assured users that their assets is SAFU.\
For those who do not understand what SAFU, it is an acronym for the Secure Asset Fund for Users. This is an emergency fund system established by Binance in 2018 to ensure that the liquidity of users is never at risk no matter what happens to the exchange. Turns out, even Changpeng Zhao understood the importance of having systems in place.
While the details are still not clear, the report by Coindesk stated that Changpeng Zhao pleaded guilty to violating the Bank Secrecy Act. It is still not clear if CZ knowingly or unknowingly allowed certain entities to use his trading platform without verifying essential details. However, a court ruling showed that he had accepted some pre-agreed terms, and his sentencing will take place in February 2024.
Based on the official reports, it remains to be said whether the incident was intentional or a mistake. However, the end result is that it caused a scandal that rubbed off on the establishment. In fact, there were fears that this occurrence may affect the overall performance of cryptocurrencies.
The most important lesson from this incident is that humans are prone to errors. CZ is a titan in the blockchain industry and has successfully built and managed the biggest enterprise in Web3 for several years. However, he made a mistake and paid dearly for it. In fact, his company (and arguably his legacy) would have suffered too if he had not created a system in place.
The biggest lesson from this unpleasant incident is that blockchain companies need to put proper systems in place. Meanwhile, this is not to say that crypto establishments are not creating structures. That these firms are still in operation shows that there are structures in place. However, it is essential to build structures that will not just stand the test of time but will outlive time.
One common practice in most blockchain companies is the establishment of DAOs. For those who do not understand, DAO is an acronym for Decentralized Autonomous Organizations. These organizations consist of people with no direct affiliation or employment with the company. Most times, the group comprises shareholders who own significant portions of the token behind the project.
Their job is to initiate changes by voting for or against certain decisions regarding the operation within the blockchain. Depending on the assigned authority, some DAOs also vote regarding transactions and changes to the blockchain system. The aim of setting up these autonomous organizations is to ensure fairness and give shareholders some level of power.
While they have significant benefits, there are several issues with these decentralized organizations. Like in the case of CZ, humans can make mistakes. Worse still, certain individuals are not altruistic. In this regard, allowing DAOs to oversee certain aspects of operations can be detrimental to the business. This means that transactions will be delayed if one or two individuals disapprove of the disbursal of funds. While DAO voting systems work based on a pre-agreed percentage, individual votes still count.
Considering the imperfections of human beings, the best measures to put in place are trustless blockchain systems that do not rely on human interference. This is essential for processes that are either repetitive or require completion multiple times. Even the most efficient person who pays very close attention to detail may miss one or two figures. Worse still, this innocent mistake may happen on the worst day or instance and cause severe damage.
This is not to say that Decentralized Autonomous Organizations are no longer useful or problematic. Instead, the focus is for blockchain companies to revise the role of DAOs. These groups should focus on more strategic decisions instead of the day-to-day operations like approving transfers and all. Instead of doing the job themselves, they can vote on the most effective approach to take and leave the tasks to technology.
Tectum SoftNote Bills are the perfect example of trustless blockchain systems that developers can imbibe to build their projects. This technology eliminates the chances of errors of default by automating the entire process of conducting transactions. Furthermore, automating transfers ensures that users are always in total control and have complete ownership of their funds. Meanwhile, how is this even possible?
Tectum SoftNote Bills remove the need for pools where funds are deposited and withdrawn from. Instead of adding liquidity in one place, individual owners get to maintain ownership of their tokens at all times. Should they decide to send or receive cryptocurrencies, our blockchain and smart contract manage the entire process. Once the receiver scans the QR Code and enters the private passcode, they gain ownership of the funds. Simultaneously, the system changes the passcode and gives the new owner a new code.
While this process may seem long, it occurs faster than someone can round “CZ.” Since we have the fastest blockchain in the world, users will never notice any lapse in processing time, no matter the volume of traffic.
