DeFi protocol to open new frontiers in bond markets through innovation

A DeFi protocol has introduced a novel bond standard for the cryptocurrency market, diverging significantly from centralized systems.

 

The cryptocurrency market differs significantly from the centralized systems found in traditional financial markets and utilizes blockchain technology, and the newly-introduced digitized bonds are no exception.

 

By leveraging blockchain technology, digitizing a wide array of financial instruments becomes possible, transforming previously inaccessible products into digitized tradable assets. Combining the functionality of cryptocurrencies with the stability of digital bonds leads to transparent and fair market pricing, enabling investors to make more informed decisions.

 

The decentralized finance (DeFi) protocol Secured Finance bestows several pivotal advantages upon the digital bond market. The protocol’s on-chain order book system significantly amplifies market transparency and efficiency, liberating the process from centralized constraints and actualizing a peer-to-peer (P2P) market structure. The decentralized approach facilitates seamless integration with the broader financial system, thereby markedly expanding the market’s potential reach and impact.

 

The on-chain order book system ensures market price formation is open and transparent, reflecting market trends. In contrast, off-chain and pool-based systems do not reflect the overall market trends. Most DeFi protocols use pools where investors lock their tokens to make liquidity to the protocol. Conversely, Secured Finance’s on-chain order book system demonstrates the importance of combining blockchain technology with traditional financial insights. Secured Finance’s system attains interoperability and composability, facilitating connections between self-executing smart contracts that automate terms without intermediaries.

 

Using blockchain incurs gas fee payments to the network to ensure its continued operation and maintenance. Ethereum, a favored network for many DeFi protocols, is especially notorious for its high gas fees. Secured Finance addresses this challenge through technological innovations like lazy evaluation to ensure the efficient functioning of the order book while simultaneously managing and minimizing associated costs.

 

Enhanced predictability of future interest rates

Despite its wonders, the crypto market is infamous for high volatility and presents a hurdle for investors transitioning from the more stable environment of traditional finance. Secured Finance overtakes the volatility issue by generating a yield curve, which makes future interest rate trends in the market predictable and allows investors to make more strategic investments. Using the yield curve brings new opportunities to the market and improves risk management capabilities.

 

“Our project is not just about offering new financial products but about transforming the foundation of the market itself,” Secured Finance AG founder and CEO Masa Kikuchi said. Secured Finance AG is the developer of Secured Finance protocol, which will be managed by a DAO. Kikuchi stressed that the main goal of the protocol is to lead the crypto market into the next stage of traditional finance.

 

Last but not least, Secured Finance’s influence on the bond market is poised to impact the derivatives market profoundly. The integration of the yield curve becomes instrumental in the pricing of derivative products, thereby augmenting the market’s depth and fostering greater diversity.