Tag: financialreportingecosystem

Decentralized Finance Is on The Rise What You Need To Know in 2021

Few had heard much about decentralized finance (DeFi) in its early days in late 2017 and late 2019, beyond murmurs about Bitcoin and a mysterious new digital technology called blockchain. 

But a pandemic can change everything. 

Since May of this year, the total value locked (TVL)—the amount of any currency locked into tokens, the vehicle of holding and moving assets on blockchain, in smart contracts on a blockchain ecosystem—in decentralized finance projects rose a whopping 2,000 percent, according to DeFi Pulse. Many investors would be hard-pressed to find such an astronomical rise of any assets or expansion of any financial ecosystem, but DeFi app developers seemed to find success. So what’s the rage, and why does it matter going into the new year? 

What is DeFi?

DeFi, many fintech leaders argue, is the world’s answer to the 2008 financial crisis. Thanks to poor decision making and a lack of proper financial regulation, legacy financial institutions brought the world’s economy to its knees in the most major financial crisis since the Great Depression. The knee-jerk reaction was to create an ecosystem dependent on every link in the chain, rather than centralized authorities—hence the term “decentralized finance.”

The concept of blockchain, a decentralized ledger, was designed to ensure financial transactions would be transparent. Moreover, transaction approval would come from network individuals incentivized to approve them by solving complex mathematical equations or by network consensus voting. 

Later, the idea of operating a decentralized financial system on a decentralized ledger, independent of legacy institutions, grew into a thriving, albeit relatively small, ecosystem. Now, users can find financial services on the distributed ledger for loans, insurance, margin trading, exchanges, and yield farming (yielding rewards from staking digital assets on a network to help facilitate network liquidity).

But there is still a way to go. Not enough consumers are comfortable with DeFi quite yet, because platform accessibility and blockchain tribalism remain a problem. Nevertheless, now the world is experiencing another economic crisis brought on by the COVID-19 pandemic, and DeFi is finally getting its day in the sun.

Related: Getting Drawn Into DeFi? Here Are Three Major Considerations

E-wallets are leveling up

For companies and individuals already active in the space, navigating the ecosystem remains impeded by technical limitations. In order to access certain markets and execute transactions on the blockchain—whether it’s borrowing or lending, staking assets in liquidity pools, or trading on an exchange—users need to own an e-wallet that’s properly connected to the ecosystem. 

E-wallets are the backbone of transactions on blockchain. Just as the digital assets they help transact and store, these wallets are secure, transparent, and easily accessible to users. At least, that’s the idea behind them, though there are various degrees of security and transparency. For DeFi to attract more users, the wallets must be compatible with multiple blockchains running financial dApps (decentralized apps that operate on a blockchain system). One of the first wallets, created by Ethereum and called “MyEtherWallet” (MEW), lacked a user-friendly interface and was challenging to grasp for people outside the hardcore crypto crowd.

Since then, a number of blockchain developers have created alternative e-wallet solutions. Most recently, Spielworks, a blockchain gaming startup, reached an agreement with Equilibrium and DeFiBox to integrate its e-wallet “Wombat,” which is currently available on the Telos and EOS blockchain mainnet (a blockchain network that is fully developed, deployed, and operational).

The Wombat wallet provides users with access to several DeFi platforms that offer token exchanges, yield farming, borrowing, and lending. Wombat recently also integrated with Bitfinex’s new EOS exchange, Eosfinex, as well as 8 other DeFi networks. Rather impressively, the wallet also offers free and fast account creation, automatic key backup, and free blockchain resources. 

Related: Cryptocurrency Innovators Need to Simplify User Experience

Developments in blockchain wallets, such as Wombat’s, will be pivotal in the next few years in the growth of DeFi applications and the movement of users toward decentralized finance and away from traditional finance. While wallets are important, so are the underlying mechanisms to piece the entire ecosystem together, because one a DeFi ecosystem is not enough if confined to just one blockchain mainnet.

Piecing it all together

“A house divided against itself cannot stand.” President Lincoln’s famous quote referred to the Civil War that ravaged the United States at the time, but his historically renowned words can apply very well to the blockchain community today. 

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For DeFi to reach its maximum potential, as a decentralized ecosystem that doesn’t answer to a central authority, blockchain platforms must stand united and interoperate. Could anyone imagine if payment transfers between regular banks were not possible? How could an economy function? This is the sort of technical problem plaguing the DeFi world: Each blockchain platform has its own benefits, but each remains largely separated from the others in its own silo. The root of the problem is attitude, the other part is technical limitations.

Related: 15 Crazy and Surprising Ways People Are Using Blockchain

Ethereum and EOS are primary examples of this sort of rivalry, both of which have their own technical benefits for dApp developers. If the two ecosystems could be connected to one another, EOS-based and Ethereum-based developers alike, for example, could benefit from each other’s platform’s strengths. Users could also benefit, via financial opportunities without having to sacrifice shifting their base from one blockchain to another.

This is precisely what LiquidApps’s latest development—its DAPP Network bridging—has solved. LiquidApps’s technology provides the technical mechanisms to connect separate blockchain mainnets and recently provided its tools to EOS-based developers to successfully deploy a bridge between EOS and Ethereum.

This was shortly followed by decentralized social media app Yup’s deployment that demonstrated the possibility of moving tokens easily between different once-separate blockchain mainnets. It still remains to be seen how long it will take before blockchain platforms themselves integrate built-in cross-chain technologies, but LiquidApps is starting the next crucial step to DeFi development.

Whether it’s cross-chain technology or the e-wallets that grant access to dApps, tech developments and attitudes in the DeFi space over the next few years will determine its success. The latest developments suggest the future of DeFi looks promising. Time to go decentralized.

By: Ariel Shapira Entrepreneur Leadership Network Contributor

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Paris Fintech Forum

by O. Bussmann, CEO, Bussmann Advisory (CH) Speakers *M. Froehler, CEO, Morpher (AT) *H. Gebbing, Managing Director, Finoa (DE) *U. Shtybel, Vice president, HighCastle (UK) *N. Filali, Head of Blockchain Program, Caisse des Dépôts (FR) more on http://www.parisfintechforum.com/videos2020

99Bitcoins

Start trading Bitcoin and cryptocurrency here: http://bit.ly/2Vptr2X DeFi applications – https://defipulse.com/defi-list/ DeFi is becoming more and more popular as the main use case for cryptocurrencies. This video explains in detail what DeFi is and what you should know about before getting involved. 0:38 Bitcoin and Our Financial System 1:24 Our Centralized Financial System 1:59 What is DeFi? 2:22 DeFi Components 4:16 – DAI explained 5:51 – DEXs explained 6:33 – Decentralized money markets 8:06 Money Legos 8:56 DeFi Advantages and Risks 10:02 Conclusion For the complete text guide visit: https://bit.ly/2R35g6Z Join our 7-day Bitcoin crash course absolutely free: http://bit.ly/2pB4X5B Learn ANYTHING about Bitcoin and cryptocurrencies on our YouTube channel: http://bit.ly/2BVbxeF Get the latest news and prices on your phone: iOS – https://apple.co/2yf02LJ Android – http://bit.ly/2NrMVw2

Building Resilience: The Importance Of Audit During Times Of Disruption

The COVID-19 crisis has exacerbated the existing challenges facing businesses and exposed new risks that must be addressed. To better understand these challenges, Deloitte Global conducted a survey of 351 respondents from around the world in April and May 2020, at the height of the initial global COVID-19 lockdown.

Through this survey, we sought to better understand the value that c-suite, finance and audit committee executives, investors, shareholders, and board members place on audit as a result of COVID-19.

The results unveil some of the most pressing COVID-19 concerns, many of which are still relevant today, as well as executives’ changing perceptions about the role of auditors in approaching these challenges.

The importance of assessing risk

Deloitte’s survey reveals respondents were seeking insights that could help them assess the risk presented by COVID-19 or similar “black swan events.” In fact, 90% of executives in our survey felt that management could benefit by taking a page from the auditor’s playbook in assessing risks from such events. For example, adhering to sound internal controls principles and practices, employing robust systems of quality control, and entrenching a culture of ethics and integrity can go a long way to helping an organization remain resilient in times of crisis.

Businesses that seek to understand the long-term impacts of the crisis on their operating models are more likely to find new ways to quickly adapt to the post-COVID-19 world. To navigate this emerging environment, all participants in the financial reporting ecosystem from companies and boards to regulators, auditors, and investors, will need to continue to participate in regular and transparent engagement.

Successful businesses will find opportunities to learn from the COVID-19 crisis and use their experiences to prepare for future disruptive events. For example, some companies—Deloitte included—are leveraging their cloud infrastructure and investments in innovative collaboration tools as well as virtual learning.

Addressing resiliency concerns

While the pandemic has exposed weaknesses in the ways some businesses operate, it’s also ushered in a new reality of virtual working. Driving a reliance on digital technology and collaboration tools has left many executives concerned about the long-term efficacy of their pre-COVID-19 business strategies. When asked about the resilience of their companies during COVID-19, the two largest concerns for respondents were viability of their business models (e.g., impacts on infrastructure, logistics, technologies, ongoing operations, and go-to market strategies) (57%) and accounting and financial reporting issues (54%).

When viewed by geography, respondent concerns shifted somewhat. Brazil, France, India, and the US rated business model concerns the highest. European respondents in general showed greater concern for the health and well-being of their employees (49%), and Asia Pacific respondents’ had the greatest concern for customer relationships and future demand (49%).

The pandemic has impacted industries in different ways, and the results reflected these differences in executives’ concern by sector.

For example, consumer products companies cited financial resilience (capital stability and liquidity) and liquidity as their top concern (64%), while companies in the financial services industry were most concerned with the brand and reputation of their businesses (55%).

Evolving the financial reporting ecosystem

The economic and health crisis resulting from the pandemic has also caused the process of financial reporting to be far more challenging than before. Professionals must now deal with travel restrictions which prevent routine in- person meetings and activities, market volatility that impacts estimates and valuations, challenges of cross-border data sharing, and complex tax implications of work-from-home mandates.

It is therefore unsurprising that 54% of executives shared that navigating accounting and financial reporting issues was a top concern—this was an especially common concern among investors. They are seeking objective insight about systems of control and quality that informs guidance in difficult decisions relating to forecasts, estimates, and other judgments related to valuations and complex accounting treatments.

Infographic: Covid-19 concerns
Deloitte Global

When asked what actions their businesses were planning to take to respond to COVID-19 challenges, 63% of executives said they were focusing on communications with investors and stakeholders on business challenges and impacts. This response amplifies the positive potential impact that constructive engagement throughout the financial reporting ecosystem could have on markets.

Many regulators have acknowledged the uncertainties created by COVID-19 and emphasized the need for high-quality reporting that includes the transparent disclosure of new risks and assumptions made. These comments have provided some assurance for reporters and users of financial statements alike, and more regulator input will go a long way in reinforcing trust and reliability.

Access to timely, transparent, meaningful data and insights to inform financial reporting and associated disclosures remains critical. It enables stakeholders— investors, employees, suppliers, governments, and regulators—to identify which companies have so-far mitigated the disruptive effects of the pandemic.

Looking forward

As businesses continue to adjust to the new normal, understanding the long-term effects of the pandemic and what actions we all need to take is critical. COVID-19 has revealed just how disruptive events can be on “business as usual” and emphasized the need for future planning. With threats like climate change ramping up there is a lot to be considered and planned for. Further, the pandemic has brought into sharper focus the need for transparent and reliable information beyond historical financial statements.

Doing business has been forever changed, including how auditors operate. It is clear that the auditing profession has an important role to play in advancing economic recovery. This is why the conversation around the future of audit is so critical at this moment in time.

Jean-Marc Mickeler

Jean-Marc Mickeler

Jean-Marc Mickeler is the Deloitte Global Audit & Assurance Business Leader. He started his career at Deloitte in 1994, overseeing the audit of several major international banks. Jean-Marc holds an MSc in Management from Amiens Business School. He is a registered Statutory Auditor and an ACPR registered auditor. Jean-Marc has also served as the Chairman of the Professional Club Control Commission of the DNCG (Professional Football League) since 2017.

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