Firmo - Taking On Derivatives And Vulnerabilities
Firmo is looking to make waves in the blockchain world with their implementation of secure derivative capabilities on top of the most used smart contract platforms in the space. Their goals are ambitious and extremely valuable to expanding the reach of cryptocurrencies as we know them. There's a lot of great things to say about this project, but a couple of the benefits are so impactful that I'm going to take a deeper dive in only two aspects in this post.
Adapted from Firmo's Twitter Page
Why Derivatives
Derivatives aren't non-existent in the cryptocurrency space, but they are quite complicated and vulnerable. As noted on their website, Firmo identifies that 1/7th of the worlds economy runs on derivatives. However, we don't really hear too much about cryptocurrencies being used in that space. Why is that? Well, it mostly comes down to trust and security concerns outlined in the next section, but it also turns out that creating these types of smart contracts comes with a high level of difficulty in the current systems on the market. Check out this video from Nir Blumberger on the Firmo team discussing why we don't see a lot about derivatives in the crypto space.
So, if we know how expansively derivatives are used in the world's economy, and we also know that they aren't widely utilized in the cryptocurrency space, that would mean that there is a huge opportunity correct? That's one of the main reasons Firmo is so exciting! Firmo has found a way to integrate with Ethereum, and soon many of the other top smart contract currencies, to simplify the process of using derivatives. The impact of such a move could be enormous! With so many important players working with derivatives in the world's economy, how many do you suppose have stayed at arms length from cryptocurrencies in part because it could not easily and effectively handle the entirety of their contractual needs?
Vulnerability Concerns
I eluded to security concerns earlier, but it really is such an expansive topic that it deserves its own section. Security and trust are absolutely imperative for growing business and forming any type of contract. Blockchain already has made huge strides in this space, if for no other reason at least because of the ability to store records that are easy to review and "impossible" to change. Impossible in quotations because it turns out that some of the blockchain technologies in the market have revealed vulnerabilities. Properly implemented and written, it is nearly impossible for any sort of changes to the blockchain outside of a 51% attack where 51% of the mining hash rate could simply insert their own version of the blockchain. However, even that sort of attack is unlikely because you'd make more money by simply continuing to mine 51%+ than you would rewriting the blockchain and effectively killing the price.
That being said, those who create their own decentralized applications on a blockchain such as Ethereum typically raise funds in Ethereum to finance their project. One security flaw known as the "DAO hack" occurred when the DAO ICO had more than 3.6 million ETH siphoned into a fake "child DAO" with the same structure. Here's a more comprehensive article about this particular attack. Another attack came in the form of exploiting a vulnerability in the Parity multi-sig wallet code. They were effectively able to freeze 513,743 ETH and have affected around 573 wallets in total. Here's a good article from cointelegraph.com discussing this hack. In both of these cases, someone tried to build something on the Ethereum network and made an error in their code that could be exploited. The capacity for error writing smart contracts using Solidity is absolutely a concern.
This is why Firmo has generated it's own FirmoLang code that is far more user friendly and secure. It allows you to write a much shorter and easy to follow code that then is processed by the FirmoLang EVM compiler and implemented safely on the Ethereum blockchain. It will also be able to do this for other popular smart contract blockchains in the near future as the Firmo technology and FirmoLang code are not specific to any single blockchain. For more information directly from the Firmo team on smart contract hacks that have occurred, here's a great article from their team on the issue. From their research into this, they also indicate on their website that "45% of the smart contracts written in Ethereum's Solidity are prone to attacks" similar to those described above, which is quite alarming!
Summary
The main reasons that blockchain platforms have not penetrated their respective markets further than they have are missing or incomplete functionality, security concerns, and market volatility. If you can handle the first two issues, further scaling will solve the third. Firmo directly improves both functionality by adding the ability to easily utilize derivatives, and security by creating airtight coding capabilities that can be integrated with any smart contract platform in time. This project is in a unique space to directly overcome some of the most important obstacles that are holding crypto back from further adoptions, and I'm excited to see it's main-net launch scheduled for November of 2018.
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