Blockchain in the context of COVID-19

Maciej Zieliński

16 Apr 2020
Blockchain in the context of COVID-19

The world's pandemic is constantly affecting our daily lives, forcing us to redefine our view of many branches of life and business. Recent days have brought many dynamic changes, and more are constantly appearing on the horizon. But are there also new opportunities besides new problems? Where can blockchain allow us to adapt to the current situation?

Supply and distribution of medicines and medical equipment

In crisis situations, the management of the supply of medicines and medical equipment is a key issue which, as the covid-19 pandemic shows, should be secured globally, and any mistake can have tragic consequences for hundreds of patients. The current situation shows how flawed modern systems can be, which are unable to protect us e.g. from periodic shortages of products as important as masks.

 The supply chains of protection agents or medicines are extremely sensitive and susceptible to manipulation, and many parties with different and sometimes even conflicting interests are involved in them. Blockchain provides a secure platform to solve this problem, introducing greater data transparency and better product traceability. Because a blockchain record can only be verified and updated with a "smart contract", manipulating the block chain is also very difficult. 

Blockchain allows to work out a compromise and trust at protocol level between all parties involved. This is crucial in situations where demand for a particular product exceeds supply and product availability may prove to be inadequate to actual demand. Blockchain can allow us to create a decentralised system for the distribution of medicines in which the interests of one party do not take precedence over the other. 

One of the companies working to secure the drug supply chain using blockchain and IoT technology is Chronicled. The company has been on the market for several years now, implementing decentralized supply chain ecosystems and building a protocol-based solution to improve global trade in key industries, including pharmaceuticals.

Banking services  

The world's coronavirus pandemic forces us to redefine our view of many branches of business. Sources such as The Economist and Forbes have been telling us for several weeks about the real risk of a global economic crisis comparable to that of 2008. One of the sectors that are certainly facing dynamic changes is the financial one. 

Before 2008, banks had little competition, which allowed them to monopolise financial services. This allowed them to charge high commissions, add hidden fees to the rates offered or overstate currency margins. It was them who dictated the conditions - if the consumer needed money he could only go to them. When it comes to the financial services market, there was practically no other choice. Customers often followed the rules created by banks, which were often unfavorable for them, because they usually had no other viable options. 

However, the events that started with the collapse of Lehman Brothers in September 2008 led to an accumulation of aversion to the financial system at the time, which was accompanied by a general lack of confidence in the banking sector. Changes in customer mentality triggered a demand for different solutions from the previous ones, which created an opportunity for new players to enter a market where they started to offer better, more competitive services. This has triggered dynamic changes in the industry. 

An example of using blockchain technology on the banking services market is Request. This decentralised network based on Ethereum enables users to, among other things, perform transactions between themselves, send or request payments or issue invoices. Whereas developed by Symbiont and Ipreo companies Synaps  using blockchain-based smart contracts seeks to improve and automate the market for credit syndicates. 

Today, when the coronavirus pandemic brings with it another threat of financial crisis, the demand for fintech is likely to increase sharply again. Many consumers will lose confidence in the traditional form of banking services and start looking for alternative options. Again, this will create an opportunity for those who will offer new, innovative products based on modern technologies such as blockchain, offering opportunities such as peer to peer transactions or the decentralisation of asset transfer. 

Verification of identity

The reduction of social relations contributes to the growing popularity of remote communication tools. This will create a demand for solutions for authentication of digital certificates and identities verified by cryptography, not by the participation of a person. Basing the verification process on blockchain is simply cheaper and more secure than using a third party.  At a time when the lack of trust in relationships, especially business relationships, seems to be a common problem, obtaining it at the level of IT protocol seems to be a solution created for the needs of the modern market 

An example of a company operating in this area is Spanish Validated ID provide digital identity solutions designed primarily for remote working and e-commerce. Their ViDSigner is a comprehensive electronic signature service that allows users to issue honored signatures in several ways - including a sliding card, biometric signature or automatic seal.

New, safer asset transfer methods

Transferring business interactions to the Internet will increase the demand for secure asset transfer methods. Blockchain seems to be the ideal solution here. For several years now, we have been observing how the tokenization and trading of assets in a decentralized system based on it is gaining popularity in various industries, including those as different from each other as real estate and music. When a blockchain occurs, the need to engage an external third party disappears, so that asset transfer processes can be faster and become cheaper to maintain. Additionally, recording transaction data in the blockchain reduces their vulnerability to manipulation or fraud. 

Such solutions are implemented by 2014, among others, by the company Bitmark, which claims that although modern societies have developed property rights and intellectual property rights, they have not protected digital content. Therefore, through the use of blockchain technology, it enables the transfer of digital content in a peer to peer system, including health data, digital art collections, music rights and medical records.  

Certificates of authenticity based on cryptography

According to Maciej Jędrzejczyk. CEE Blockchain Leader’a at IBM  may reveal many inaccuracies in the supply chain depending on demand and production from China. This will lead to the disclosure of counterfeit certificates of authenticity of parts of the products originating from there. As he predicts, "this will lead manufacturers to use irrefutable proofs of origin based on cryptography rather than on authority".

Blockchain can record transactions in the supply chain and provide a unique identity for each product unit, tracking its journey in the supply chain. In addition, the unit can be paired with an NFC chip, QR code or RFID tag to enable real-time digital recording of progress. The Shanghai company is already working on this mechanism VeChain dealing with the problem of authenticating luxury goods. 

Hope for the entertainment industry

The entertainment industry seems to be one of the most affected by the outbreak. Thousands of cancelled concerts, festivals and other music events have brought and will bring losses of many millions. In a market dominated by giants such as Spotify, iTunes and YouTube, the creators will suffer most. While streaming portals are more active, the royalties paid to artists represent only a small percentage of the profits from playing their music. Blockchain-based portals such as Opus and Vezt, which are able to pay artists almost 100% of the profits thanks to the use of blockchain technology, become an alternative for artists. For many artists, they can be the key to survival in such a rapidly changing market. 

The consequences of the current situation will be coming back to us severely in the coming months. However, in addition to numerous threats, there are also new opportunities. It is up to us whether we will be able to take advantage of them and limit the losses resulting from the pandemic. The technology may again prove to be irreplaceable here. We will probably need modern solutions such as blockchain as never before.

Reducing losses, solving current problems and adapting to upcoming changes are areas where modern technology will prove necessary. In the context of an epidemic, many blockchain-based solutions turn out to be even more valid, there are also new areas where the implication of this technology may be the most optimal choice. The coming weeks will require the implementation of significant changes in many branches of business, without a doubt blockchain is a technology able to do this.

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Nextrope Launches “AI-Powered Smart Contract Auditing” Project

Miłosz Mach

03 Mar 2025
Nextrope Launches “AI-Powered Smart Contract Auditing” Project

Next Enterprises Sp. z o.o. is implementing a project co-financed by the European Funds, titled "Smart Contract Auditing with Artificial Intelligence". The goal of the project is to develop and deploy an advanced AI model that enables efficient analysis, vulnerability detection, and security auditing of smart contracts, taking into account their complexity and uniqueness.

Planned Project Tasks:

  • Development of an AI model trained on Solidity keywords;
  • Creation of an effective model in simulated conditions;
  • Analysis of the unpredictability of compiled code execution within the Ethereum Virtual Machine (EVM) in the context of the developed model in a controlled environment;
  • Validation of the model in real-world conditions.

Target Groups:

  • Specialized audit firms focused on smart contract security;
  • Companies developing and/or deploying smart contracts on various platforms;
  • Exchanges, wallet providers, and decentralized applications (dApps) in the blockchain sector;
  • Government agencies or industry compliance bodies responsible for blockchain technology regulation;
  • Smart contract security specialists and developers.

The implementation of the developed tool will enable automated and efficient auditing of smart contracts. The model will provide detailed insights and recommendations for optimizing transaction costs and improving contract performance. As a result, users will be able to make informed decisions, enhancing security and operational efficiency within the blockchain ecosystem. Key benefits stem from the model’s training on smart contract code, audit data, and detected vulnerabilities. Additionally, the incorporation of chaos theory principles will allow for more precise risk and anomaly forecasting.

By deploying this advanced AI model, the project will enhance the security, efficiency, and accessibility of blockchain technology for end users. This will translate into tangible social and economic benefits, including:

  1. Economic Security
  2. Business and Financial Security
  3. Increased Public Trust
  4. Optimization of Transaction Costs
  5. Support for Innovation and Entrepreneurship
  6. Education and Public Awareness

Project Value: 4,173,953.24 PLN
European Funds Contribution: 3,090,156.39 PLN

#EUFunds #EuropeanFunds

Challenges in Smart Contract Auditing

Smart contracts have become a fundamental component of blockchain technology, eliminating intermediaries, and automating processes. However, their growing significance also introduces new challenges, particularly in ensuring security and compliance with industry standards.

Traditional smart contract audits rely heavily on manual code reviews, which are expensive, time-consuming, and prone to human error. As cyber threats continue to evolve, the use of advanced technologies to support the auditing process is imperative.

The Role of AI in Data Analysis

Artificial intelligence (AI) introduces a new paradigm in smart contract security assessment by leveraging its capability to process vast amounts of data and identify patterns that may go unnoticed with traditional auditing methods. AI enables:

  • Automated code analysis and real-time detection of potential vulnerabilities,
  • Optimization of auditing processes by reducing human errors and improving threat identification efficiency,
  • Better adaptation to evolving regulatory requirements and emerging threats within the blockchain ecosystem,
  • Rapid analysis of large datasets, allowing for quick insights and the detection of non-obvious dependencies in smart contract code.

By utilizing AI, the auditing process becomes more comprehensive, precise, and scalable, enabling continuous risk monitoring and adaptation to new attack vectors.

A New Era of Smart Contract Security with AI

With the support of European Funds under the European Funds for a Modern Economy (FENG) program, we are conducting research on next-generation blockchain auditing methods, reinforcing Nextrope’s position as a leader in innovative technology solutions.

The "Smart Contract Auditing with Artificial Intelligence (AI)" project contributes to key aspects of blockchain security by:

  • Automating smart contract audits, accelerating verification processes, and improving their accuracy,
  • Optimizing costs, making professional audits more accessible to a broader range of entities,
  • Raising security standards and enhancing regulatory compliance,
  • Increasing trust in smart contracts, fostering broader technology adoption.

Interested in learning more about our project or discovering how to utilize AI in your company? 📩 Contact us at contact@nextrope.com for further details!

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How NOT to Create a DAO: Common Pitfalls You Should Avoid

Kajetan Olas

27 Dec 2024
How NOT to Create a DAO: Common Pitfalls You Should Avoid

Decentralized Autonomous Organizations (DAOs) represent a fundamental shift in how communities, companies, and initiatives can coordinate efforts, funds, and decisions on the blockchain. By leveraging transparent smart contracts and on-chain governance mechanisms, DAOs aim to distribute authority, reduce overhead, and foster a more democratic decision-making process. However, building a successful DAO isn’t just about cutting-edge tech or grand ideas—it also requires a clear vision, well-crafted governance rules, and a strategically engaged community.

In this article, we’ll take a counterintuitive approach by highlighting how not to create a DAO. By focusing on common pitfalls—from legal oversights to governance missteps—we can better understand what truly contributes to a thriving, sustainable DAO. This perspective aligns with the importance of recognizing cognitive biases, such as insensitivity to base rates and the conjunction fallacy, which often lead enthusiastic founders to overlook real-world data and complexity. Avoiding these traps can be the difference between launching a resilient DAO and watching an ambitious project crumble under misaligned structures or unmet expectations.

2. Missing the Governance Threshold Mark

Governance Thresholds Gone Wrong

Governance thresholds dictate how many votes or what percentage of voting power is needed to pass a proposal within a DAO. Striking the right balance here is crucial. Thresholds that are set too high can stifle progress by making it nearly impossible for proposals to succeed, effectively discouraging member participation. On the other hand, thresholds that are too low can lead to frivolous proposals or constant voting spam, making governance more of a burden than a benefit.

When designing your DAO’s thresholds, consider:

  • Community size and engagement levels: Larger communities might handle higher thresholds more comfortably, while smaller groups may benefit from lower requirements to encourage active participation.
  • Type of proposals: Operational decisions may need a lower threshold, whereas critical changes (such as tokenomics or treasury management) often require more consensus.
  • Voter fatigue: The more frequently members are asked to vote—and if it’s too easy to put forward proposals—the greater the risk of apathy or disengagement.

Over-Complex vs. Over-Simplified Governance

It’s tempting to either pile on complicated governance rules or oversimplify them to keep decision-making quick. However, both extremes can be problematic. Simplicity in governance is key to enhancing clarity and participation. Overly complex smart contracts and procedural layers can dissuade newcomers from getting involved, while an oversimplified model might fail to address potential conflicts or security vulnerabilities.

Some issues to watch out for:

  • Complex Smart Contracts: More code means more potential bugs and greater difficulty in auditing or updating governance logic.
  • Opaque Voting Processes: If members can’t easily understand how votes are tallied or how proposals are introduced, engagement drops.
  • Excessive Centralization in “Simple” Models: In trying to streamline governance, some DAOs inadvertently concentrate power in the hands of a few decision-makers.

Ultimately, aiming for a balanced governance framework—one that is easy enough for members to participate in but comprehensive enough to protect the DAO from abuse—is central to avoiding the pitfalls of governance threshold mismanagement.

3. Underestimating Legal and Regulatory Aspects

Legal Wrappers and Compliance

Building a DAO without considering legal and regulatory frameworks is a common recipe for disaster. While decentralization is a powerful concept, it doesn’t absolve projects from potential liabilities and compliance obligations. Assigning your DAO a formal legal wrapper—whether it’s a foundation, a cooperative, an LLC, or another entity type—can help mitigate personal risks for contributors and align your organization with existing regulatory regimes.

Failing to think through these details often leads to:

  • Personal Liability for Founders: Without a proper legal entity, core contributors might become personally responsible for any legal disputes or financial mishaps involving the DAO.
  • Regulatory Crackdowns: Governing bodies worldwide are actively monitoring DAOs for compliance with securities laws, anti-money laundering (AML) regulations, and tax obligations. Ignoring these can lead to penalties, fines, or forced shutdowns.

Non-Existent or Inadequate Documentation

Equally problematic is the lack of clear documentation outlining the DAO’s legal structure and operational protocols. From voting procedures to treasury management, every aspect of the DAO’s lifecycle should be properly documented to reduce ambiguity and help new members understand their responsibilities. Inadequate documentation or outright neglect can create:

  • Confusion Over Roles and Responsibilities: Without explicit definitions, it’s easy for tasks to fall through the cracks or for disagreements to escalate.
  • Inability to Enforce Rules: DAOs rely on both smart contracts and social consensus. Formalizing rules in documentation helps ensure consistent enforcement and prevents unwelcome surprises.

In short, underestimating the legal dimension of DAO creation can derail even the most innovative projects. By proactively addressing legal and regulatory considerations—and maintaining thorough documentation—you not only protect core contributors but also fortify trust within your community and with external stakeholders.

Overlooking Community Building

The Importance of Community Engagement

A DAO, at its core, is nothing without an active and supportive community. Driving grassroots enthusiasm and participation is often the deciding factor between a thriving DAO and one that fizzles out. Yet, it’s surprisingly easy to underestimate just how vital it is to nurture community trust and engagement—especially during the early stages.

Some common pitfalls include:

  • Treating Community Members as Passive Observers
    Instead of viewing your community as a dynamic force, you might slip into a one-way communication style. This discourages members from taking initiative or contributing fresh ideas.
  • Lack of Clear Roles and Channels
    Without well-defined roles and open communication channels—like forums, Discord servers, or governance platforms—members can feel confused about where to participate or how to add value.
  • Ignoring Early Feedback
    In a DAO, the “wisdom of the crowd” can be a powerful asset. Overlooking or trivializing user feedback can lead to missed opportunities for innovation and improvement.

Failing to Incentivize Properly

Well-structured incentives lie at the heart of any successful DAO. Whether you’re offering governance tokens, staking rewards, or recognition badges, these incentives must be aligned with the DAO’s long-term goals. Misalignment often causes short-sighted behavior, where participants chase quick rewards rather than contributing meaningfully.

  • Overemphasis on Token Speculation
    If the primary draw for community members is the promise of quick token price gains, you risk attracting speculators instead of builders. This can lead to fleeting participation and sell-offs at the first sign of trouble.
  • Neglecting Non-Monetary Rewards
    Recognition, social standing, and meaningful collaboration can be just as powerful as financial incentives. When a DAO fails to provide pathways for skill development or leadership, member engagement wanes.
  • Cognitive Bias Traps
    Biases such as the conjunction fallacy can mislead founders into believing that if multiple positive outcomes are possible (e.g., rising token prices, active participation, mainstream adoption), then all those outcomes will inevitably happen together. This wishful thinking can blind DAOs to the need for thoughtful, data-driven incentive models.

To avoid these pitfalls, DAO creators must actively foster a culture of transparency, collaboration, and mutual respect. By setting clear expectations, leveraging diverse incentive structures, and consistently involving community feedback, you ensure members are motivated to contribute more than just their votes—they become co-creators in the DAO’s shared vision.

5. Ignoring Technical Considerations

Token Standards and Governance Frameworks

A solid technical foundation is essential when you create a DAO, particularly if it involves on-chain governance. Selecting the appropriate token standards and governance frameworks can significantly impact your DAO’s security, efficiency, and scalability.

Some pitfalls to watch out for include:

  • Choosing Incompatible Token Standards
    If your DAO relies on a token that isn’t easily integrated with governance contracts or lacks upgradeability, you might face roadblocks when implementing new features or patching vulnerabilities.
  • Underestimating Smart Contract Complexity
    Even “simple” governance tokens can hide complex logic behind the scenes. Overlooking these complexities may result in bugs, lockouts, or exploits that harm the DAO’s reputation and finances.
  • Ignoring Off-Chain vs. On-Chain Dynamics
    Governance strategies often combine on-chain decisions with off-chain discussions (e.g., using platforms like Discord or forums). Failing to synchronize these two spheres can fracture community engagement and hamper decision-making.

Poor Architecture and Security

Robust security isn’t just about preventing hacks—it's about building an architecture that can adapt to evolving threats and changing community needs.

Key oversights include:

  • Inadequate Auditing
    Smart contracts require thorough reviews, both automated and manual. Rushing to mainnet deployment without proper audits can lead to major losses—financial, reputational, or both.
  • No Contingency Plans
    If a vulnerability is discovered, how will you respond? Lacking emergency procedures or fallback governance mechanisms can leave a DAO paralyzed when critical decisions must be made quickly.
  • Over-Engineered Solutions
    While security is paramount, over-complicating the DAO’s architecture can create unintended vulnerabilities. Keeping your setup as simple as possible reduces attack surfaces and makes it easier for community members to understand and trust the system.

In short, technical considerations form the bedrock of a functional DAO. Choosing appropriate token standards, thoroughly auditing contracts, and designing for both present-day and future needs are non-negotiable steps in avoiding costly pitfalls.

Best Practices and Lessons

When studying successful DAOs, certain themes emerge time and again. According to Aragon the most robust DAOs share a commitment to simplicity, iteration, and transparent governance. Instead of rolling out overly sophisticated models from day one, they evolve and adapt based on community feedback and real-world performance.

Here are a few best practices worth emulating:

  • Iterative Approach to Governance
    Start small and build up. Launch a Minimal Viable DAO (MVD) to test voting processes, incentive mechanisms, and proposal management. Gather community feedback and refine before taking bigger steps.
  • Simple, Transparent Rules and Processes
    Ensure proposals are easy to understand and that the voting process is accessible to all token holders. Overly complicated frameworks can dissuade new members from participating.
  • Clear Roles and Shared Responsibilities
    Define contributor and community member roles early on. Whether you rely on working groups, committees, or elected leaders, clarity prevents power vacuums and fosters collaboration.
  • Open Communication and Education
    From Discord channels to public documentation, keep conversation and learning at the heart of your DAO. Encourage members to ask questions, propose improvements, and take leadership roles.

Academic Perspectives

Beyond practical experience, a growing body of research offers theoretical insights that can strengthen DAO governance. The discusses emerging patterns in DAOs, including how incentives and on-chain rules interact with off-chain social dynamics. By examining these findings, DAO creators can better anticipate challenges—like voter apathy, whale influence, or collusion—and integrate solutions from the outset.

Incorporating academic perspectives can help:

  • Validate Governance Assumptions
    Empirical data and rigorous analyses can confirm or challenge the assumptions behind your DAO’s architecture, preventing costly mistakes.
  • Stay Ahead of Regulatory and Social Shifts
    Academics often explore how upcoming policies or societal trends might impact DAOs, offering a forward-looking lens that day-to-day builders might miss.
  • Establish Credibility
    Aligning your DAO’s structure and operations with recognized research signals professionalism and thoroughness, potentially attracting more serious contributors, partners, and investors.

Conclusion

As you can see, creating a DAO involves more than just deploying a smart contract and distributing tokens. By examining these common pitfalls—from poor governance thresholds to inadequate legal structures, from neglecting community engagement to disregarding technical complexities—you gain a clearer picture of what not to do when you set out to create a DAO. Failing to address these areas often leads to compromised security, stalled decision-making, regulatory headaches, or outright community collapse

At Nextrope, we specialize in tailored blockchain and cryptocurrency solutions, including DAO creation and tokenomics design. If you’re looking to avoid these common pitfalls and build a thriving DAO that stands the test of time, feel free to contact us or explore more resources on our blog.