North American technology company Morgan DF Fintoch’s DeFi (Decentralised Finance) platform – Fintoch – uses an innovative blockchain technology – HyBriid – to provide a new solution to DeFi’s long-standing security challenges.
The full name of DeFi is Decentralised Finance, which broadly refers to blockchain-based financial applications for trading, lending, insurance, options, prediction markets, payments, and other digital asset-related transactions.
DeFi is bringing a wave of impact to traditional finance. Due to its decentralized and transparent nature, third parties who perform regulatory functions have moved from being regulated by institutions to being co-regulated by the public. The new financial products it introduces are less cumbersome to review and approve, giving consumers many more new options for financial products. However, recent incidents of frequent attacks on the DeFi industry have also raised significant doubts among the public about the security of DeFi.
Fintoch successfully solves Defi’s security challenges
Fintoch is an innovative DeFi platform. The platform offers financial services such as lending, investing, and borrowing. What makes it different from traditional DeFi is that Fintoch is more ‘secure’. Security has always been a problem for the DeFi industry. As Fintoch has solved this problem, it stands out from the rest.
The security solution proposed by Fintoch
Fintoch currently uses HyBriid, a self-developed blockchain technology, on its platform. The two core cryptographic technologies of HyBriid are ‘multi-signature’ and ‘zero-knowledge proof’.
Whenever a user wants to borrow money, a dedicated, multi-signature, lending contract wallet is automatically created. At this point, if the lender chooses to invest, their assets will be transferred into this multi-signature lending contract wallet. When the funds in the wallet are to be transferred out by the borrower, the transaction requires the signature of two of the three parties – the borrower, the platform, and the supervisory node – to provide authorization for the transaction to succeed. This way, the funds remain safe even if a hacker or a single private key is stolen.
Multiple signatures by themselves are not enough, as then the borrower may still collude privately with the supervisory node. Therefore, Fintoch also incorporates “zero-knowledge proof” cryptography, which makes the supervisory nodes anonymous. Fintoch has 100 supervisory nodes. Also, when a multi-signature lending contract wallet is generated, the contract automatically draws 10 supervisory nodes at random from the 100 anonymous supervisory nodes to collectively generate one supervisory node’s private key. In this way, even if a borrower colludes with a supervisory node, he or she cannot transfer funds. It is calculated that the chance of finding 10 supervisory nodes that are all colluding is approximately 1/17310309456440. This figure is close to zero and essentially ensures that it cannot happen.
To ensure security, borrowers can only invest with DEXs, which Fintoch has granted trust. When an investment reaches liquidation conditions (e.g. expiry of the borrowing period or exhaustion of margin), the smart contract automatically withdraws funds to ensure that it can stop the loss of the investor’s money immediately before it occurs.
All these operations are initiated by smart contracts and require the consent of two or more of the three parties. As the platform is fair and the supervisory node is compliant, any transfer of funds that complies with the rules can be approved by the contract.
The blockchain technology developed by Fintoch has successfully solved the security problems previously faced by the DeFi industry. This may lead to a more rapid development of the DeFi industry and bring a new and unexpected financial world to the public.