The DeFi market worldwide is projected to grow by 15.86% (2023-2028) resulting in a market volume of US$37 Trillion in 2028.
Decentralised Finance (DeFi) is becoming increasingly influential in the fintech landscape, is a financial system built on blockchain technology that aims to recreate and improve upon traditional financial systems, making them more open, inclusive, and accessible. In a decentralized finance ecosystem, financial services are conducted without the need for traditional intermediaries like banks or other financial institutions.
This shift is critical, as it challenges traditional finance systems which often restrict transactional speed, flexibility, and transparency, consequently diminishing user autonomy over funds. DeFi aims at eliminating much of the financial bureaucracy, broadening the scope of possibilities.
Collateralized-Token Lending
Arkadia has created a prototype of Collateralized token lending solutions. Collateralized token lending is a key component of decentralized finance (DeFi) platforms: It represents a future financial services that allow bank or Industry to borrow funds by locking up token assets (Real-World Assets token or Industry related inventory tokens,..) as collateral where:
•Borrower (bank’s users, industry…) locks up digital assets as collateral to secure a loan
•Based on the value of the collateral, the lender provides a loan, often in a stablecoin or another cryptocurrency.
•The borrower pay interest on the loanè Once the loan and interest are paid back, the borrower retrieves their collateral.
•If the borrower fails to repay, the collateral is liquidated to cover the loan.
This system leverages blockchain for transparency, security, and efficiency, often using smart contracts to automate the lending and repayment processes. Main expected benefits:
•Reduced Counterparty Risk: Collateralization helps mitigate the risk of default by borrowers. If a borrower fails to repay the loan, the lender can liquidate the collateral to recover their funds.
•Liquidity Provision: Users can use their existing cryptocurrency holdings to access liquidity without selling their assets. This allows them to maintain exposure to the market while meeting short-term liquidity needs.
•Financial Inclusion: Collateralized lending in DeFi provides a mechanism for individuals who may not have access to traditional banking services to borrow and lend in the global financial system.
•Passive Income: Users who provide collateral can earn interest on their holdings by lending them out. This allows for the potential to earn a passive income on idle assets.
•Removal of Intermediaries: Collateralized lending is often facilitated by smart contracts on decentralized platforms, reducing the need for intermediaries such as banks. This enhances the decentralized nature of the financial system.
•Flexibility and Programmability: Smart contracts govern the lending and borrowing process, allowing for automation of various aspects, such as interest rate calculations, loan issuance, and collateral liquidation.
•Market Efficiency: The availability of collateralized lending on decentralized exchanges contributes to price discovery for various assets, as it involves market participants actively assessing the value of collateral.
•Diversification of Investments: Collateralized lending enables users to diversify their investment strategies by utilizing their cryptocurrency holdings in different ways, such as earning interest through lending or gaining exposure to different assets through borrowing.
Fund tokenization
Watch our video from our partner Hedera
Payment & CBDC
Arkadia is involved in PoC development UDPN (Universal Digital Payment Network).
UDPN is a global messaging network supporting government-regulated digital currency systems, including regulated stablecoins and Central Bank Digital Currencies (CBDCs). The UDPN promotes financial inclusion by allowing enterprises around the world to connect directly with the centralised and decentralised digital currency systems of the future
The future of Central Bank Digital Currencies (CBDCs) is shaping up to be a significant shift in the financial industry worldwide. CBDCs are being explored by dozens of countries, with some already implementing versions of them. A report highlights the global phenomenon of CBDCs, with an expectation for the value of these digital currencies to increase from $100 million to $213 billion by 2030, indicating a rapid adoption and utilization rate
UDPN is a joint initiative between RedDateTech & GFT, Arkadia is glad to join and promote as per POC development
Digital Asset Tokenization
In this PoC, participants can issue tokenized assets using ERC721 or ERC1155 standards. End users can connect their asset wallets with their digital currency wallets issued by commercial banks on the UDPN, enabling them to initiate trades between asset wallets as well as carry out settlements between digital currency wallets. Issuers can manage their assets, wallets, KYCs, transactions, and trading rules/restrictions through a dedicated management portal. A user-friendly mobile trading application has been developed to allow end users to link their wallets, manage assets, and initiate transfers and settlements. To simplify the PoC, there are no trading and matchmaking algorithms in the mobile application and only direct transfers between end users are allowed.
The key difference between this PoC and other tokenization solutions is that the tokenized assets can be easily integrated with commercial bank stablecoin and CBDC wallets on the UDPN. This simplifies the settlements and enables commercial bank wallets to serve as sales channels for asset issuers. The asset wallets in this PoC can link to any digital currency wallets issued in PoC#3, PoC#10 and PoC#12.
