Written by Lisa Gibbons of https://www.blockleaders.io
When it comes to architecting the future financial landscape, who better to do it than an ex-nuclear engineer. Engineering as a trade requires a very strict skillset of caring about the minor details of a project.
Mastering a level of adaptability, problem solving, critical thinking and attention to the very minute but essential details are easily transferable to any nascent industry trying to carve out its role in our future lives. Sitting down for a discussion with Santiago Velez, Co-Founder of Sindric Solutions, the development company of the XDFi Protocol, it was clear that he brings his training and more to the table. Describing his thinking as an engineer, he believes that,
"Everything is broken somehow, therefore, everything can be improved somehow. You tend to look at things very critically, and then as factually as you can. That is particularly useful in crypto when there are a lot of narratives layered on top of facts."
As traditional financial systems continue to show their vulnerabilities, using the XDFi Protocol, Santiago and his team are pushing for a future where financial transactions are transparent, trustless, and non-custodial. It is clear from the beginning that he is passionate about empowering individuals in their financial dealings.
What does a nuclear engineer from Boston have to do with the future of the $1 quadrillion derivatives market? Well, quite a lot if Santiago and the team at Sindric have their way. The XDFi protocol was born with the vision of creating truly decentralized financial infrastructure.
At the core of Santiago’s mission for XDFi is to be part of the building blocks that help us to transition from the old financial system to decentralized financial infrastructure. Built on the Flare network, the XDFi protocol aims to eliminate the pitfalls of centralized financial services. It was created as a response to the collapses of big brands like FTX, Celsius, and Three Arrows Capital, which underscored the need for a system that adheres to the ethos of decentralization in the crypto space.
"Otherwise you could have man in the middle attacks, price manipulation." Santiago believes that bad behaviour and scamming reflects very poorly on the rest of the community. With the XDFi Protocol they are building financial infrastructure designed to avoid this mismanagement from the onset.
Santiago is quick to point out the value of the Flare Network for builders. Flare is the blockchain for data with enshrined oracles that inherit the security and decentralization of the network. An example use is the FAssets system which will enable non-smart contract tokens like BTC and DOGE to participate in DeFi on Flare. This bridges the gap between blockchain capabilities and industry needs.
"Flare has all of the prerequisites for building something like this with the decentralized oracle that feeds price data. Why is that important? It ensures that the data is accurate and cannot be manipulated by an intermediary.”
Through the use of Flare's FTSO system, which provides reliable price feeds across a wide range of assets, users can emphasize accuracy and prevent manipulation that has given the entire financial services industry a bad reputation. Inaccurate data can lead to significant market distortions, unfair practices, and even systemic risk. Flare's FTSO system mitigates these risks by providing trustworthy data for smart contracts, reinforcing the system's integrity.
One of the unique aspects of the XDFi Protocol is the introduction of the KYCT, anon-chain tokenized proof that a user has undergone a “Know Your Customer” process. The KYCT provides a solution to the conundrums of regulatory compliance and counterparty risk inherent in existing decentralized financial products.
It's a system that enables users to verify their eligibility for trading while maintaining on-chain pseudo-anonymity and ensuring that transactions meet basic regulatory standards. Santiago emphasizes that XDFi's infrastructure is designed to prevent even the creators from manipulating the system, thus instilling confidence among users and regulators alike. The smart contracts deployed on-chain for the XDFi Protocol are fully transparent for all parties to inspect and confirm at all stages of a financial transaction.
The beauty of the system is that it will already be familiar to the crypto community…“The onboarding process of earning a KYCT is very similar to what people in crypto have been used to with a centralized exchange. What’s different is that the token now resides with the user in their wallet as proof of eligibility to engage and be matched with an on-chain counterparty.”
Santiago believes in a future where large financial institutions can engage in global transactions with complete confidence in the system's integrity. His work also hints at a more democratic approach to governance within the blockchain community.
By decoupling power from token value and basing it on platform usage and proof of personhood via the KYCT, he is ensuring that active users have a say in the direction of the network. This novel governance model aligns influence with genuine engagement, avoiding the concentration of power among early adopters or large token holders.
“A lot of other projects use tokens for governance. And the problem we have is that early VCs or token holders have all the power and can make all the decisions. We decided governance was going to be decoupled from the value. Instead, governance is going to be predicated on usage. So the people who use the platform the most will accrue the most governance tokens.” To avoid cementing early user governance token accrual, and the resulting control over new and future users, the governance process is reset every quarter to ensure that it is the ongoing user community that earns and exercises governance over the protocol. This avoids the problem of disproportionate governance over time.
Santiago's commitment to the ideals of the technology is admirable and reflects his approach to building a financial system that is fair, efficient, and immune to the historical failures in the architecture of decentralized and centralized financial services to date. He stands as a beacon for those who believe in the transformative power of DeFi and the role it can play in shaping a more equitable landscape in the future.