Hi Denko, welcome to our series “Behind the Startup.” Please tell us about yourself and the story behind ? Ishan Pandey: Reef Hi Ishan, thanks for having me and I’m excited to share the story and vision behind Reef. I am the CEO and Co-founder of Reef and before starting the company, I worked at Viewly and Adelphoi as CTO. Speaking about Reef, Reef is a reliable, extensible, efficient and fast blockchain built on Substrate to make DeFi, NFTs and gaming easy to use for newcomers. It started out as a Global Liquidity Aggregator, Smart Yield Farming Aggregator, and Smart Asset Management platform designed to make it easy for beginners to get started with yield farming. Denko Mancheski: Now Reef Chain is the most advanced Ethereum VM-compatible blockchain. It’s self-upgradable and has on-chain governance. Its infrastructure also allows for EVM extensions which allows for native token bridges, scheduled calls (i.e. recurring payments), and smart contract in-place code upgrades. It will support an additional VM in the near future, which will allow developers to write code in multiple programming languages. The network runs on a Nominated Proof-of-Stake (NPoS) consensus mechanism, offering scalability and low fees. Decentralized finance is cutting-edge and a little mysterious to outsiders. The Bank of International Settlements is recently forming a committee to analyze crypto-assets exposure to the banks. According to you, do you think DeFi protocol hacks could have a considerable impact on the real economy in the future? Ishan Pandey: That’s an excellent question. For DeFi startups, cybersecurity is the key to survival as cyber-attacks are rampant. DeFi protocol Cream Finance lost $130 million and DeFi lender bZx suffered a hack of $55 million. Imagine a DeFi protocol managed by global institutions with $30 billion in total value locked – imagine if such a protocol gets hacked. It will definitely have an impact on the real economy. DeFi is the future, but we are not just even starting out when we look at the larger picture. DeFi protocols will take over the traditional financial markets and is going to be exciting, and cybersecurity will be one of the major aspects of success. Denko Mancheski: Although the crypto markets are witnessing dramatic exponential growth, privacy and interoperability issues continue to persist. What are your views on governance tokens and regulating DeFi protocols? Ishan Pandey: Governance tokens are essential for DeFi protocols as it makes the protocol decentralized and allow for the community to run the project. According to the regulators, a software protocol is not a security if it is completely decentralized with no legal entity tied behind it. Therefore, governance tokens are going to be the bread and butter of ensuring decentralization and decentralized governance. Denko Mancheski: Bitcoin cannot be regulated because it is a software and there is no legal entity behind it. Regulating DeFi is a tough job, but regulators are coming after DeFi. The FATF, in its recent update on FATF recommendations regarding VASP, has mentioned that DeFi protocols may fall under the definition of VASP, if the software and the legal entity have a commercial nexus. Therefore, it will be necessary for DeFi protocols to create a framework where the fees generated from the protocol do not benefit the legal entity behind it. Further, it is important to note that regulators regulate software and regulate the legal entities behind it. The idea of decentralized finance is now being recognized as a critical shift in the way financial markets operate. In what ways has DeFi affected the traditional financial market and according to you, how can banks leverage smart contracts? Ishan Pandey: The banking institutions are 10 years behind and it will be very risky for banks to leverage smart contracts right now. Smart contracts are still at a very nascent stage and a lot of development and testing is required before banks and traditional institutions start applying smart contracts. Further, if the bank starts experimenting with smart contracts, they will be tested in a sandbox environment. Denko Mancheski: Numerous decentralized finance (DeFi) protocols operating on Binance Smart Chain (BSC) have been hacked in recent months while the industry continues to project significant growth in 2021. How can these DeFi exploits be tackled? Further, what are the best practices for cybersecurity regarding smart contracts? Ishan Pandey: There is no way to tackle DeFi exploits except having a good cybersecurity framework. It is critical to test smart contracts in the production environment and write robust tests that imitate all circumstances that can happen after the smart contract is released. It is important to note that smart contracts can have bugs and complex smart contracts are highly susceptible to cyber threats; therefore, it is critical to test smart contracts without having any rush or feeling that you are in a race to release your smart contract without enough testing. We also have numerous exploits and post-mortem reports to learn from, and therefore we need to learn those lessons and prevent the same vulnerabilities from existing in the next DeFi product. Denko Mancheski: Do you think that DeFi protocols are susceptible to money laundering activities? Further, how can KYC and other controls be implemented in a decentralized protocol? Ishan Pandey: DeFi protocols are susceptible to money laundering if KYC/AML controls are not put in place. That’s the reason that regulators are increasing their oversight on DeFi and cryptocurrencies. DeFi protocols must-have safety cushions so that the protocols are not a safe haven for moving illicit funds. Denko Mancheski: According to you, what has been the pandemic’s overall influence on global finance? Further, how can blockchain and DeFi disrupt the global financial market? Ishan Pandey: The pandemic has really increased the adoption of e-commerce and cryptocurrencies as the majority of the people stayed at home. Even as the economic and human costs of the Covid-19 pandemic have become clear, the global financial system has served as both a source of strength—with banks and fintech assisting in the distribution of aid to small businesses and households in need—and a potential risk—with record measure of market volatility and growing concern about credit losses. Governments, central banks, regulators, and international organizations have all responded quickly to handle the economic collapse and financial consequences, but there are still debates about how policy should develop in the future to maintain financial stability. Denko Mancheski: Blockchain technologies are perfect for handling multi-party, inter-organizational, and cross-border transactions because they are ideally adapted to validating, securing, and exchanging data. Thousands of proofs of concept have been conducted worldwide over the last five years, but actual deployments have been sluggish to materialize because parties adopting blockchain as a shared ledger must agree on IP rights, governance, and economic models. Government laws have also hampered its broad usage. The Covid-19 epidemic was necessary to overcome the barriers to blockchain acceptance. The virus has exposed flaws in our supply chains, our inability to deploy resources where they are most needed to combat the pandemic, and challenges in gathering and disseminating the data required to make quick choices. To solve these issues, blockchain technologies that have been in development for years have been repurposed and released. The post-pandemic era will only accelerate the adoption of blockchain and DeFi. Disclaimer: The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence, asking the right questions and equipping readers with better opinions to make informed decisions. The material does not constitute any investment, financial, or legal advice. Please do your research before investing in any digital assets or tokens, etc. The writer does not have any vested interest in the company.

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