Industry specialists as well as common users associate the year 2021 with the DeFi boom. New projects enter the market every day and the pace of changes is skyrocketing. However, do all these projects provide real value to end-users? Do these projects have applicable solutions behind their cool presentations? Of course, the community always puts these questions and looks forward to getting detailed responses. That is why the PureFi team has provided the use case written in understandable language to show you how the PureFi protocol protects common users from being involved in malicious financial activities.
So, read and get valuable insights! Your security and comfort are the top priority for us!
As the name suggests, the Decentralized Cryptocurrency Exchanges (DEXs) do not have any central operator or governing body. The interacting parties are linked together neither by the exchange operator nor by the order book. Smart contracts enable anyone to trade or borrow in the DeFi ecosystem by transferring funds from or to the Liquidity Pools (LPs). LPs are the collection of all available token pairs for any decentralized finance action.
Anyone can add liquidity (available funds) to the LP for a reward, usually, the Liquidity Token, which is proportional to the amount of supplied funds, or equals the percentage transaction fee. This process is very similar to centralized finance when customers make deposits to a bank and this institution later decides what to do with these assets- either to lend someone or invest. In DeFi, there is no central body. Neither DEXs founders nor DeFi market participants want to face the risks of being involved in the “dirty” money trail. So, how do we can make sure that the LP accumulates only “clean assets” and, thus, complies with all anti-money laundering (AML) regulations?
PureFi Use Case
Imagine that someone, for example, Alice wants to stake some amount — let it be 300K USDT against ETH into the liquidity pool. In this case, the PureFi protocol provides its services to both parties — the LP and Alice. Its main function is the elimination of the risks related to working with illegal funds.
The LPs have open-source liquidity protocols running on the Ethereum blockchain. Alice needs to install Metamask (or any other wallet) with an extension that allows linking her crypto wallet to the staking contracts of the LPs. Such an interface will enable the secure contribution of tokens to the LP.
Creating a Pair
After creating a pair, Alice specifies the address of the LP where she wants to stake her pair and the personal wallet address from which liquidity will be added.
Checking AML Risks
The PureFi protocol will take the data from the current block on the blockchain and will check the money laundering (ML) risks of the user’s and LP’s addresses via the AML oracles. The oracles help to bring the off-chain data on-chain and provide the smart contract with required information that is stored in the “real world”. Oracles do not give away any personal information and identity.
Issuing the Verified Credentials
If all parameters are in line with a low ML score, the PureFi protocol issues the Verified Credentials (VC) certificates as the Goodwill Declaration and transfers the funds to the unregulated liquidity pool.
The VC certificates will be stored in the special off-chain wallet. They can be sent to anyone at any time upon request and this process will be completely gasless (i.e. sending Ethereum contracts will be completely free) due to the sophisticated architecture of the PureFi protocol.
When the time comes, Alice will withdraw her liquidity. The PureFi protocol will link the Goodwill Declaration to the outgoing transaction from the LP and will assign the new ML risk score. Thereby Alice will have several VC certificates stored in her wallet to prove her good intentions whenever required.
Alice is not engaged in any operations involving “dirty money”.
This interesting use case is just the element of our educational campaign aimed at demonstrating to you that PureFi is the real solution that can protect you during the journey in the DeFi world. Users need to be secured in the industry and it is the duty of industry players to safeguard the community from malicious actors.
About Hacken Foundation
Hacken Foundation gives a boost to innovative cybersecurity solutions by empowering the Hacken Ecosystem through HAI Tokenomics. All projects pass a strict pre-approval procedure before entering Hacken Foundation so that potential investors may be absolutely confident of the projects’ transparency and protection of their assets. Hacken Foundation has successfully launched 4 projects including HAPI, disBalancer, ArtWallet, and PureFi. It is just the beginning of our long journey. We keep on looking for solutions that will make difference.
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