DeFi

Understanding the Pros and Cons of Upgrading Smart Contracts in DeFi

Published

7 months ago

8 July, 2024

Understanding the pros and cons of smart contract upgradeability in DeFi

The smart contract proxy’s upgradability allows developers to update the logic of deployed smart contracts while preserving the contract’s state and address. This provides some flexibility to fix bugs or add features, but also introduces potential risks.

Smart contracts, self-executing agreements on blockchain networks, traditionally function as immutable code once deployed. This immutability is a cornerstone of trust in blockchain technology, ensuring that the terms of the contract cannot be unilaterally changed. However, the inability to modify contracts after deployment can pose challengesmainly when bugs are discovered or improvements become necessary.

Ability to upgrade proxy in smart contracts

The proxy upgrade addresses this limitation by introducing a two-contract system. One proxy contract stores state and holds user funds, while a separate logical contract contains the actual functionality. The proxy delegates function calls to the logical contract, which can be replaced with an upgraded version without changing the proxy address or disturbing the stored data.

This approach offers significant advantages. Developers can fix vulnerabilitiesimplement new features and optimize performance without disrupting user interactions or requiring fund migration. Major DeFi protocols including Compound, Aave, and Uniswap V3 have adopted scalable contracts, leveraging this flexibility to improve their platforms over time while establishing themselves as relatively trustworthy entities through a combination of rigorous security measures and transparent operations.

These protocols have implemented comprehensive security practices, including extensive audits, formal verifications, and ongoing bug-hunting programs. Their smart contracts are open source, allowing for public review and verification of functionality. Additionally, they have adopted decentralized governance systems in which token holders can participate in decision-making, improving transparency and reducing the risk of unilateral changes that could harm users.

Their proven track record further reinforces the reliability of these protocols. They have been operating successfully for long periods of time and manage billions of dollars in assets. They are constantly updating and improving their systems based on community feedback and changing market conditions. Robust monitoring and alerting systems and detailed incident response plans demonstrate their commitment to security.

Additionally, while they operate in a nascent space, their regulatory compliance efforts add another layer of credibility from a regulator’s perspective. The high liquidity of these protocols also contributes to their resilience against certain types of attacks and market manipulation. However, no system is entirely risk-free, and users should always exercise caution and conduct due diligence when interacting with a DeFi protocol.

Risks associated with scalable smart contracts

The ability to modify the logic of smart contracts introduces new vectors of potential exploitationThe risk of centralization emerges as a major concern, with upgrade capabilities often controlled by a small group of administrators or governance participants. This concentration of power can be seen as contrasting with the decentralized ethos of many blockchain projects when not coupled with transparent DAO practices.

Malicious upgrades represent Another potential threat. In the event of a compromise or bad faith act, administrators could theoretically modify contract logic to siphon off user funds or manipulate protocol operations. While governance processes and security measures aim to mitigate this risk, this possibility remains a point of contention within the community with the rise of cybercrime. Sophisticated phishing scams using AI.

Technical vulnerabilities in the upgrade process itself present additional dangers. Mistakes during upgrades can result in loss of funds, data corruption, or contracts becoming inoperable. The complexity of proxy models increases the attack surface, potentially introducing subtle bugs that can go unnoticed until exploited.

How to Interact with DeFi Safely

For users navigating the DeFi landscape, identifying and evaluating scalable contracts becomes crucial. Examining the contract code for proxy models, such as OpenZeppelin’s, can reveal scalability features. Protocol documentation often reveals upgrade capabilities, though users should be aware that this information is not always displayed prominently.

Evaluating the security of evolving contracts requires careful consideration of governance structures and upgrade processes. Upgrade lockout times allow users to react to proposed changes. Multi-signature controls over administrative functions distribute power and reduce single points of failure. The reputation and track record of the protocol team provide additional context for assessing trustworthiness.

Risk-averse users when interacting with upgradeable contracts may be advised to limit exposure and long-term storage of large amounts in these systems. Actively monitoring upgrade proposals and participating in governance processes, where possible, allows users to stay informed and potentially influence protocol decisions.

The debate over the scalability of smart contracts reflects broader tensions between innovation and security, flexibility, and immutability in the blockchain space. While scalable contracts offer powerful tools for protocol development, they require users to trust human systems rather than relying solely on immutable code.

Finding the right balance between scalability and security remains a major challenge. Users must remain vigilant and carefully assess the risks and benefits of interacting with scalable systems. Self-sovereignty comes at a cost: security costs and risks are borne by the end user. In traditional finance, these costs are borne by centralized organizations such as banks and financial institutions. This is precisely why “bank-grade security” is the term used to define high-end security systems.

Self-protection means that the responsibility lies with users, and traditional laissez-faire attitudes toward security and risk are incompatible with Web 3.

To support this, developers and protocol teams are responsible for implementing robust governance mechanisms and transparent upgrade processes to maintain user trust.

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DeFi

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Published

6 months ago

29 July, 2024

CoinFlix Staff

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Bonk and Pepe appear set to net new investors 10x to 100x returns over the next 12 months. However, cryptocurrencies in the DeFi play-to-earn gaming sector could offer even greater returns. As August approaches, Rollblock is emerging as a standout DeFi play-to-earn gem with the potential to 100x-1000x gains in the fourth quarter and beyond.

The project features an innovative revenue sharing model and exceptional accessibility, attracting players and investors. Additionally, Rollblock’s extensive game library of over 150 titles and enhanced sports betting are further driving excitement for the platform. Cryptocurrency analysts are expecting a sudden surge in demand. 800% a push for Rollblock from the beginning of September.

Bonk remains strong despite market fluctuations

While most well-known cryptocurrencies struggled throughout July, Bonk remained strong. As one of the highest-grossing meme cryptocurrencies of 2024, Bonk rose over 24% in July, while most cryptocurrencies experienced negative fluctuations.

Investors looking to add a relatively safe memecoin to their portfolio should consider Bonk. While Bonk is unlikely to generate explosive gains of 250x to 1,000x from here on out, Bonk could still theoretically provide returns in the 20x to 100x range.

Pepe should see a big rise in the next bull run

Alongside Bonk, Pepe has yet to go through a bull run. This means that there are still substantial gains to be made from Pepe over the next 12 months.

Pepe is down 4% in 30 days, but that shouldn’t worry Pepe investors in 2024. Experts believe Pepe’s best days are still ahead, with crypto analysts predicting a 10x to 50x surge in the next election cycle around November.

In the long term, Pepe could surpass the 100x mark for today’s investors. However, Pepe is a memecoin, and one should exercise caution when investing in purely speculative assets that have no utility.

Rollblock’s Unprecedented Hype Potential Could Push It Past 100x Valuation in Q4

Rollblock is a GambleFi Play-to-Earn token that integrates centralized and decentralized gambling on a single platform. By allowing players to earn rewards through active participation and gameplay, the platform creates a compelling incentive structure that appeals to both casual and competitive players.

With its cutting-edge blockchain technology, Rollblock offers top-notch security that keeps bets and transactions on the platform secure. The platform’s lack of KYC mandates appeals to both users who value anonymity and security.

Rollblock’s revenue sharing model, which allocates up to 30% of casino revenue to RBLK token holders, is a major draw for investors. The model involves burning half of the repurchased tokens and distributing the other half to stakers, increasing the token’s value and encouraging long-term investment.

The platform is also constantly evolving thanks to user feedback which has enabled updates such as the upcoming sports betting feature within the platform’s casino. This addition will complement Rollblock’s extensive game library of over 150 titles, ranging from traditional poker to innovative blockchain-based games.

RBLK is expected to emerge as one of the leading DeFi tokens in 2024. With a price of $0.0172 with impressive growth potential and over 140 million tokens sold recently, Rollblock is on track to enter the top 100 cryptocurrencies by Q4, making today a lucrative time to buy RBLK tokens.

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DeFi

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Published

6 months ago

29 July, 2024

CoinFlix Staff

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Veteran cryptocurrency investor Arthur Cheong believes the digital asset sector offers long-term holders a golden opportunity.

Cheong, the founder of DeFiance Capital, tell His 171,700 followers on social media platform X indicate that he believes decentralized finance (DeFi) is hugely undervalued.

According to Cheong, DeFi projects are innovating at a rapid pace and leaving traditional financial (TradFi) companies in the dust.

“It’s been a long time since I’ve been this excited about the risk/reward and potential upside of DeFi. This is probably the most misjudged moment since the pre-DeFi summer of 2020, with extremely promising prospects.

I see opportunities not only in OG (original) DeFi, but also in some newer projects that are evolving rapidly and growing at a pace that fintech startups will do anything to match.

The veteran investor also believes that crypto is now here to stay following recent launch from the Ethereum spot market (ETH) exchange-traded funds (ETFs) last week.

“Overall, the floodgates are open and there is no turning back. TradFi asset managers will continue to launch new crypto products because, guess what: there is huge demand for them!”

I expect them to launch actively managed crypto ETFs [in the] coming years. ”

Earlier this month, Cheong laid that it might be a bad strategy for cryptocurrencies to seek mass adoption, believing that digital assets are designed to disrupt several key financial sectors.

“I think we should accept that cryptocurrencies may not be suited for mass adoption like Web2, but rather are optimized for some narrow but very high-impact use cases like stateless global money, cross-border payments, and decentralized finance.

Chasing mass adoption of normies may be chasing the wrong Grail from the start.

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