The Ethereum ecosystem has offered the ability to transact trustlessly with counterparties since its launch on 30th July 2015. The primary tool for this is via smart contracts which custody funds and act as an intelligent, fully autonomous escrow service between parties. Predetermined rules decide if/when funds will transfer between parties. Whilst initially holding out great promise of secure transactions between untrusted participants the reality has been quite different. Smart contracts have proven to be:
  • Expensive to write (engineers cost $200K+ annually)
  • Expensive to audit
  • Open to hacking/exploits
  • Unable to offer transaction privacy
These limitations mean digital assets are not reaching their full potential. The ecosystem throws many resources into removing the need for trust between parties however what if trust could be demonstrated on-chain? Someone could see on-chain proof that the counterparty acts in a responsible manner. In fact the counterparty may well value their reputation more highly than the cost savings in reneging on a single trade ? This would mean smart contracts are not a significant requirement for trade. Many risks and costs would fall away and suddenly anyone could enter the ecosystem and transact with low barriers to entry.
Digital assets would have a chance to reach their full potential which includes:
  • Instant friction-less transactions between any two parties worldwide.
  • Transaction privacy. The terms of trade don't need to be embedded into a smart contract.
  • Self custody. Assets remain in EOA wallet at all times with private key in owners control.
  • Shield from Sovereign Risk. Especially for those in developing or underdeveloped countries where asset freezing, high inflation and corruption eat away at wealth in local currencies.
Kagami aims to offer a platform to demonstrate trust and responsible asset management. This opens up new opportunities such as:
  • OTC transactions directly between parties without a broker. No collateral upfront. In TRADFI OTC transactions make up the vast majority of derivatives traded and this ratio could be mirrored in digital assets.
  • Transparent DAO treasury management. Participants can view the risk controls put in place by DAO treasurer along with alerts when these controls are not adhered to.
  • Increased uptake of digital asset loans. Digital loans can be offered to customers worldwide which vastly increases a lenders acquisition pool. Risk profile of candidates can now be assessed on past financial management history to determine loan suitability and appropriate interest rates.
  • Uplift in business to business international transactions via digital asset technology. This is because trust replaces escrow like smart-contracts. No more time delays, exchange rate expense, excessive international transaction fees or funds rejection.
  • Improvement in investor relations. Alerts can be sent to investors in realtime via messaging platforms such as email/discord/slack etc when an organisations digital assets are not managed in accordance with pre-definded risk controls. Dashboards and reports can show performance to risk controls over time.
This documentation aims to expand the Kagami vision and demonstrate how it can play a role in the adoption of digital assets.
Last modified 1mo ago