We have started this project as an experiment to make a bridge between CeFi and DeFi. Basically, we believe that centralized exchanges are not aligned with the spirit of blockchain-powered cryptocurrencies. Centralized exchanges are, well, centralized, and all crypto should be decentralized.
The problem we are trying to solve
The failures of big crypto projects in 2022 were actually the failures of traditional centralized institutions transferred into the crypto world simply dropping regulation. No surprise they failed. Regulations in traditional finance exist to prevent the failure of such institutions. So, when you drop the regulation, you need to substitute it with something else. One idea is to substitute regulations with algorithmic processes embedded into smart contracts. And we can see that this idea works nicely in the crypto DEX world (think of Uniswap).
Our approach to the solution
The usual thinking about fiat-to-crypto exchanges is based on the assumption that fiat transactions can’t be decentralized. While this is ‘almost’ true, we offer a new view on this: one shouldn’t decentralize fiat payments, rather one should decentralize the connection between fiat and crypto worlds. This is what we are doing here.
We see the transactions on our exchange as two parallel streams: crypto and fiat, connected by escrow logic and decentralized dispute resolution.
Users of the platform can rely on escrow smart contracts to transfer their crypto, using traditional P2P means of payments for fiat transactions and a decentralized PoS mechanism to resolve any disputes.
How does it work?
Our platform works quite similarly to the other P2P exchanges, with the main difference – the disputes are not resolved by central authority, but by the community of exchange users.
The mechanism works as follows:
The seller creates a proposal to sell crypto. The proposal can be created only if the seller has enough crypto in their account.
If a buyer would like to buy from the seller, they create a request indicating the amount they wish to buy.
The seller accepts the request and transfers their crypto into the escrow account. There are clearly defined rules on how and by whom crypto can be withdrawn from this escrow.
The buyer makes a payment to the seller using an agreed-upon P2P payment method.
Upon receiving the fiat payment, the seller releases the crypto.
If the buyer doesn’t make the fiat payment or the seller doesn’t release crypto from the escrow, any party can initiate dispute resolution. Holders of Finja Tokens can vote to support the buyer or the seller. The winner will receive crypto automatically.
Other differences of our platform include:
No registration is needed, and even no email is required, users can simply connect their wallets and make transactions. It means there is no personal data sharing required.
Since we don’t collect any user data, we don’t need any traditional back-end: no databases that anyone can hack. We run solely on smart contracts. If we need to store potentially sensitive data, we just store a hash of this data, so users can check against it if needed.
We actually care about preventing money laundering or financing terrorism. By relying on traditional means of payment, we assume that all KYC and other financial monitoring procedures are done by the providers of such fiat payment services. They should work within the limits set by their regulators.
So, why would you use Finja versus other platforms?
The short answer is threefold:
- Safety – no need to trust your assets to any centralized institution where they can, hmmm, disappear
- Privacy – Finja doesn’t see and store your data, so it can’t be leaked. Also, while you’re doing P2P payments that can be tracked down, it’s very difficult to tie them to your crypto transactions. No one needs to know where you spend your money.
- Community ownership – every time you do your transaction with Finja, you receive Finja tokens and can participate in dispute resolution voting. Later, we plan to add commission sharing with token holders and participation in the platform governance (we hope that regulators won’t outlaw this).
More details are coming
We understand that some of the points need further clarification and we will write separate posts on the compliance with regulations, dispute resolutions, and some of the choices we made in regard to the mechanics of the platform.
Meanwhile, we encourage you to try out our platform and provide your feedback on Discord or Twitter.
Date: July, 13th 2023
sha256 hash: 6A198FB3D949BDD1917B1FBE2487C43D8954A0CFB3AC3C04D999252D66CB2AFE