Underlying factors for developing shift
Crypto safekeeping and earning challenges
Last updated
Crypto safekeeping and earning challenges
Last updated
All centralized solutions have discredited themselves.
Recent events have underscored the inherent risks associated with centralized solutions for storing and generating income with cryptocurrencies. Prominent cases involving platforms such as FTX, Celsius, Voyager, and others reveal that Centralized Finance (CeFi) operates as a black box, where a lack of robust risk management and occasional instances of fraud can result in substantial financial losses. In the era of decentralized finance development, relying on CeFi for cryptocurrency storage is increasingly regarded as imprudent—a sentiment encapsulated by the adage, "not your keys, not your coins."
Even in DeFi, centralization is substantial.
Even within the DeFi landscape an undeniable challenge persists—significant centralization. Numerous DeFi protocols incorporate roles in their smart contracts, endowing teams with direct or indirect access to users' assets. While some of these roles are tied to multisig addresses, requiring multiple signatures, more often than not, they are held by members of the same team. While roles are occasionally essential for protocol growth and updates, their frequent presence lacks justification. Instances abound where the existence of roles with "super powers" in smart contracts resulted in user asset losses, rivaling challenges seen in traditional finance. This prompts a critical question: Why introduce centralization into the decentralized realm of finance?
DeFi is rapidly expanding, introducing a heightened complexity for navigation and risk identification.
In the rapidly growing crypto landscape, DeFi stands out as one of the most dynamic segments, witnessing the emergence of numerous protocols daily. Globally diverse teams present intriguing and sometimes groundbreaking financial innovations, evident in the success stories of and the intricately designed soft liquidation system of (LLAMA), to name a few. Yet, amidst this innovation, identifying truly valuable projects poses a formidable challenge. Ensuring the meticulous design of economic mechanics and validating smart contract security are crucial steps before considering asset allocation to any specific DeFi protocol. Notably, the absence of standards, rating agencies, and analogous financial world inventions adds an extra layer of complexity to this evaluation process.
How does shift address these challenges?
Shift is an infrastructure solution that consists of a fully transparent, . Its primary function is to automate the user's liquidity provision in DeFi protocols across various EVM chains and reinvest the generated returns. In the smart contracts of the Shift ecosystem, there is no centralization; only the user has access to their liquidity. All off-chain services that assist users in generating call data during interactions with smart contracts are part of Shift. This is open-source software with publicly accessible source code, available to everyone.
Shift conducts an analysis of a large DeFi protocol pipeline. All protocols undergo during the study, where risks are identified both in the design of the protocols' economic mechanics and in the technical aspects (potential vulnerabilities for hacking) within the analysis of smart contract code. Special emphasis is placed on identifying centralization in DeFi protocol smart contract ecosystems.
Based on the study and analysis of DeFi protocols, optimal risk and are selected, and a is formed with a sufficient level of diversification. This ensures that users have a comfortable level of risk-return ratio, even in the event of loss in one of the protocols represented in the Vault, as losses due to exploits, rug pulls, and other malicious actions in the rapidly growing DeFi market still occur.
In the realm of DeFi protocol risk management, shift employs a proprietary to counter potential threats to user liquidity. This in-house-developed solution operates in real-time, swiftly identifying unsafe events within DeFi protocols. When these events unfold, the system autonomously triggers the withdrawal of user assets from the protocols, securely directing them to the user's wallet. It's essential to note that the risk mitigation solution maintains a strict separation—no access to user assets is granted, and its sole function is to facilitate the secure withdrawal and redirection of assets to the designated user wallet.