The financial system without a ‘leader’: How blockchain solves the problems of decentralization


Commercial organizations, non-state banks, insurance companies, households are all part of the decentralized finance system, of which we are participants. Now in these areas is actively introduced blockade – a technology that in itself assumes the distribution of data and the lack of a permanent centralized node that makes decisions.

Nevertheless, the block-platform causes public authorities to have more questions than private corporations, which are also not directly regulated by the authorities. What concerns are associated with the decentralized database? And what is it profitable, in spite of possible risks? Let’s try to understand.


Legal issues and government intervention


Central banks of many countries say that a block of business can contribute to the development of business, and cryptocurrencies are a promising investment. In addition, increasingly large credit organizations use highly loaded systems with large data sets (Big Data) in the customer service area – here technology will definitely help to optimize the work.

But there is a question of legal regulation: with whom to ask, if the means users of platforms will be deduced fraudulent ways? At the same time, it is important for the detachment, both for a decentralized network, to minimize government intervention.


The popular cryptocurrency bitcoin (Bitcoin) was equated to a separate currency in Japan, Sweden, Luxembourg and Germany. In turn, the EU Court recognized the bitcoins as traditional money. And in Canada, the popular cryptocurrency is officially called an electronic means of payment and is regulated by laws against money laundering. Authorities of different countries are actively trying to assert their legal influence on the Bitcoin platform, but, given its anonymity, it is rather difficult to do so.


With Ethereum everything is a bit simpler: the platform was developed not so much for transactions as for creating decentralized servers using smart contracts – preprogrammed tasks that are performed when certain events occur in the network. But on the platform’s cryptocurrency – ether – the same decision of the EU Court and other general laws on digital currencies adopted in several states apply.


The CREDITS  platform took into account the threat from possible state intervention in the block system and the impact of such intervention on the CREDITS (CS) crypto currency rate, and proposed various solutions to legal issues. First, the system allows you to track the owner throughout the supply chain with the help of constant sources of information. Secondly, the platform is a public data register, which stores information about different parties to transactions, so it is quite easy to recognize a possible problem in a decentralized network.


Block defense without ‘leader’ in mind

In April of this year, the Crypto-currency officially became a payment instrument in Japan. According to CryptoCoinNews, the deputy head of the Central Bank of the country Hiroshi Nakaso stressed that with the use of a decentralized network of detachments, regulators will be able to give people access to accounts in real time – and this is an undoubted plus. However, the Central Bank of Japan is not yet actively implementing blocking: despite the general positive attitude towards technology, Tokyo considers it to be ‘young and immature’ – that is, not fully protected.


‘On guard’ Bitcoin and the Etherium are miners who create blocks and thus support the life of the network. The more in the network of miners, the more it is resistant to hacker attacks. But both systems are vulnerable. In the summer, The New York Times told of the frequent cases of theft of mobile numbers that are tied to bitcoin-purses. The ethereum also can not be called completely safe: in July, attackers found the vulnerabilities of multi-user purses and hacked accounts. To improve the situation, both platforms use forks – changes in the block-protocol that are run for convenience and security of the network.


The CREDITS  platform is an example of how a system that has abandoned the system can create a secure decentralized environment. Its security is provided by mixed consensus algorithms mDPoS and BFT. This algorithm allows you to order the nodes of the block-network, which are allowed to vote. The node takes part in it if it can confirm the relevance of the software and the locally stored registry. Also, each node can become trusted or principal no more than once in a certain period of time. This ensures decentralization of the network. Due to the absence of a permanent ‘leader’ in the system, security is ensured. For example, decentralization does not allow you to intercept and change a transaction while it passes through the network, because of the constant monitoring and analysis of incoming transactions to the network from different sources.


Security, unlike many other platforms, is complemented by homomorphic encryption. Such an algorithm involves performing mathematical operations with encrypted text and obtaining an encrypted result that coincides with the answer of the same problem if it were solved openly. Such a system, proposed by CREDITS, minimizes the vulnerability of wallets and increases the speed of the network, because the information should not be decoded. And in this there is an obvious plus: CREDITS makes a transaction in 1 – 3 seconds. During this time, there will not be a problem of double expenditure, that is, the retransmission of the same funds.


Perhaps the biggest innovation that the CREDITS platform offers is new, completely complete smart contracts. Not everyone knows that the capabilities of the Ethereum network, which was a pioneer in developing smart contracts, are limited, and there is no way to realize everything a user wants. For example, you can not make regularly charged payments or set a write-off exactly at a certain time.

In this situation, you have to send a command from a third-party system to a particular operation. Developers of the CREDITS platform assure that their system is really complete and autonomous, capable of performing all these operations.




The financial system without a single ‘confirming’ center is a direction, on the one hand, promising, as the authorities of many countries say. The decentralized environment is more protected from fraud, the victims of which periodically become banks and corporations, and behind them – and their customers. But a system without a ‘leader’ does not completely eliminate the risks, and when intruders manage to find ‘weak places’, eternal questions arise, ‘Who is to blame?’ And ‘What to do?’.

State bodies solve this problem by equating the crypto currency to electronic means, a separate currency or a form of non-physical property and introducing regulation of virtual money by already existing laws. But blocking as a decentralized system is important to reduce the influence of the state on the platform.

For this, the block-platform is trying to maintain a balance between transparency and anonymity, which the technology assumes, and the ability to track the source of the problem and the likely intruder in the network. And of course, to ensure maximum safety. But while hackers are looking for loopholes in a decentralized network, the blockbuster is developing new security measures. The financial system, in which technology is being actively introduced, requires not just permanent updates of platforms, but new solutions. Forks, combined algorithms of consensus, advanced types of encryption – all these offer the decentralized financial system actively developing block-platforms. It remains to be hoped that in the future all these proposed methods will bring technology to a new level of use in the financial sphere.

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