Finance
Architecting Crypto Financial Instruments
Architecting Crypto Financial Instruments
Published by Gbaf News
Posted on September 6, 2018
Global Banking and Finance Review
Company
Published by Gbaf News
Posted on September 6, 2018
By: Gabriel Dusil, co-Founder & General Manager, Adel Ecosystem Ltd. &: John McLeod, Founder, JEA Associates Ltd.
Since Blockchain technology entered the mainstream consciousness, its potential in traditional financial services and ability to disrupt existing industries has been widely discussed.
Areas such as retail, trade, logistics and syndicated loans remain incredibly convoluted with many phases of verification and confirmations before transactions are completed. Blockchain tech can streamline these processes and bring similar value to what the internet did for the information age.
Less understood is blockchain’s potential in cryptocurrency transactions. By definition, their deployment is less evolved when compared to their regulated counterparts. Executing trades, hedging currency swaps, binary options, and posting contracts are more established with fiat services.
Gabriel Dusil
Peer-to-peer Decentralized Cryptocurrency eXchange (DCX) allow peers to hedge, speculate or trade different cryptocurrencies based financial instruments such as Spot, Swap, Forward, and Loans. DCX’s are typically based on Ethereum smart contracts, where trading parties agree on all parameters without the need for third-party remediation. Smart contracts aim to provide additional security to traditional contract engagements and reduce transaction costs.
As a crypto trading platform, DCX’s will evolve in step with rapid changes in the blockchain industry; its initial phase will offer a Crypto Spot financial instrument, meaning cryptocurrencies that are traded on-the-spot. The spot exchange rate is the price to exchange one currency for another for immediate delivery, representing the price buyers pay in one cryptocurrency to purchase a second one. The spot exchange rate is for delivery on the earliest value date. The aim is to complete this process in near real-time, revolutionizing the standard settlement offered by traditional banks, which can frustratingly take several days.
Forward contracts are another service DCX’s aim to disrupt. This instrument is when two parties buy or sell an asset at a specified price on a future date. A crypto forward can be used for hedging or speculation; however, its non-standardized nature makes it particularly appropriate for hedging. Unlike standard futures contracts, this one can be customized to any commodity, value and delivery date.
This new and relatively unexplored area of digital currency swaps is an area of crypto finance that DXC’s aims to address. Traditionally, foreign exchange swaps take place when bankers agree on a certain price for the currency to be exchanged. Crypto Swaps allows for digital currencies to be used to fund charges designated in another cryptocurrency, without acquiring foreign exchange risk, allowing companies to manage various digital currencies more efficiently. In addition, these instruments enable traders to sell a contract to option holders that give them the right, but not the obligation, to buy or sell a cryptocurrency at an agreed-upon price, during a certain time period. Crypto smart contracts enable traders to agree on when to buy and sell digital assets, currencies, and holdings when set parameters have been reached.
The impact of blockchain on traditional financial services will be huge. A recent report by Accenture1 cited that eight of the world’s largest banks could potentially save 8 billion US$ on a cost-base of 30 billion US$[1], by improved centralize finance reporting, savings on compliance, operational costs,and business operations. This costs saving doesn’t even take into account improved service times, stronger capital bases and greater accessibility for opportunities in unbanked areas of the world.
Services such as Adel’s iFin (www.adel.io) aims to evolve crypto trading beyond banks that are rooted in legacy supply chains and physical infrastructure. DCX’s have the potential to be the digital interface where anyone, irrespective of their geolocation and experience, can log in, execute trades, and agree on smart contracts that suit their individual needs. By doing this, DCX empower people to build their portfolio, without expensive intermediaries and weighed infrastructure inefficiencies. Crypto has exposed a market gap of users wanting unabated access to an interoperable cross-blockchain platform, enabling an ecosystem of users anywhere in the world to interact and trade, free from brick and mortar intermediaries. Its potential applications are limitless.
About the Authors
Gabriel is a sales and marketing expert with over 25 years in senior positions at Motorola, VeriSign (acquired by Symantec in 2010 for 1.250 billion US$), and SecureWorks (acquired by Dell in 2011 for 612 million US$), and Cognitive Security (acquired by Cisco in 2013 for 25 million US$). He is a blockchain entrepreneur, with strengths in international business strategy. Gabriel has a bachelor’s degree in Engineering Physics from McMaster University in Canada and expert knowledge in blockchain incubation, cloud computing, IT security, and video streaming, and Over the Top Content (OTT). Gabriel also runs his own company, Euro Tech Startupss.r.o., and manages a professional blog at https://dusil.com.
John has spent nearly a decade working for a number of leading public relations firms in London, focusing primarily on PR management in the financial services sector. John’s expertise includes blockchain technology and the evolution of cryptocurrencies in financial services. That’s why he recently founded his own consulting firm, JEA Associates Ltd., which is specifically positioned to communicate the value proposition of this burgeoning technology. John has spent the past year successfully executing campaigns for a digital currency consultancy, decentralized financial solutions, and online payments platforms.
References
[1] Banking on Blockchain, a value analysis for investment banks: https://www.accenture.com/t20170120T074124Z__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Consulting/Accenture-Banking-on-Blockchain.pdf#zoom=50
By: Gabriel Dusil, co-Founder & General Manager, Adel Ecosystem Ltd. &: John McLeod, Founder, JEA Associates Ltd.
Since Blockchain technology entered the mainstream consciousness, its potential in traditional financial services and ability to disrupt existing industries has been widely discussed.
Areas such as retail, trade, logistics and syndicated loans remain incredibly convoluted with many phases of verification and confirmations before transactions are completed. Blockchain tech can streamline these processes and bring similar value to what the internet did for the information age.
Less understood is blockchain’s potential in cryptocurrency transactions. By definition, their deployment is less evolved when compared to their regulated counterparts. Executing trades, hedging currency swaps, binary options, and posting contracts are more established with fiat services.
Gabriel Dusil
Peer-to-peer Decentralized Cryptocurrency eXchange (DCX) allow peers to hedge, speculate or trade different cryptocurrencies based financial instruments such as Spot, Swap, Forward, and Loans. DCX’s are typically based on Ethereum smart contracts, where trading parties agree on all parameters without the need for third-party remediation. Smart contracts aim to provide additional security to traditional contract engagements and reduce transaction costs.
As a crypto trading platform, DCX’s will evolve in step with rapid changes in the blockchain industry; its initial phase will offer a Crypto Spot financial instrument, meaning cryptocurrencies that are traded on-the-spot. The spot exchange rate is the price to exchange one currency for another for immediate delivery, representing the price buyers pay in one cryptocurrency to purchase a second one. The spot exchange rate is for delivery on the earliest value date. The aim is to complete this process in near real-time, revolutionizing the standard settlement offered by traditional banks, which can frustratingly take several days.
Forward contracts are another service DCX’s aim to disrupt. This instrument is when two parties buy or sell an asset at a specified price on a future date. A crypto forward can be used for hedging or speculation; however, its non-standardized nature makes it particularly appropriate for hedging. Unlike standard futures contracts, this one can be customized to any commodity, value and delivery date.
This new and relatively unexplored area of digital currency swaps is an area of crypto finance that DXC’s aims to address. Traditionally, foreign exchange swaps take place when bankers agree on a certain price for the currency to be exchanged. Crypto Swaps allows for digital currencies to be used to fund charges designated in another cryptocurrency, without acquiring foreign exchange risk, allowing companies to manage various digital currencies more efficiently. In addition, these instruments enable traders to sell a contract to option holders that give them the right, but not the obligation, to buy or sell a cryptocurrency at an agreed-upon price, during a certain time period. Crypto smart contracts enable traders to agree on when to buy and sell digital assets, currencies, and holdings when set parameters have been reached.
The impact of blockchain on traditional financial services will be huge. A recent report by Accenture1 cited that eight of the world’s largest banks could potentially save 8 billion US$ on a cost-base of 30 billion US$[1], by improved centralize finance reporting, savings on compliance, operational costs,and business operations. This costs saving doesn’t even take into account improved service times, stronger capital bases and greater accessibility for opportunities in unbanked areas of the world.
Services such as Adel’s iFin (www.adel.io) aims to evolve crypto trading beyond banks that are rooted in legacy supply chains and physical infrastructure. DCX’s have the potential to be the digital interface where anyone, irrespective of their geolocation and experience, can log in, execute trades, and agree on smart contracts that suit their individual needs. By doing this, DCX empower people to build their portfolio, without expensive intermediaries and weighed infrastructure inefficiencies. Crypto has exposed a market gap of users wanting unabated access to an interoperable cross-blockchain platform, enabling an ecosystem of users anywhere in the world to interact and trade, free from brick and mortar intermediaries. Its potential applications are limitless.
About the Authors
Gabriel is a sales and marketing expert with over 25 years in senior positions at Motorola, VeriSign (acquired by Symantec in 2010 for 1.250 billion US$), and SecureWorks (acquired by Dell in 2011 for 612 million US$), and Cognitive Security (acquired by Cisco in 2013 for 25 million US$). He is a blockchain entrepreneur, with strengths in international business strategy. Gabriel has a bachelor’s degree in Engineering Physics from McMaster University in Canada and expert knowledge in blockchain incubation, cloud computing, IT security, and video streaming, and Over the Top Content (OTT). Gabriel also runs his own company, Euro Tech Startupss.r.o., and manages a professional blog at https://dusil.com.
John has spent nearly a decade working for a number of leading public relations firms in London, focusing primarily on PR management in the financial services sector. John’s expertise includes blockchain technology and the evolution of cryptocurrencies in financial services. That’s why he recently founded his own consulting firm, JEA Associates Ltd., which is specifically positioned to communicate the value proposition of this burgeoning technology. John has spent the past year successfully executing campaigns for a digital currency consultancy, decentralized financial solutions, and online payments platforms.
References
[1] Banking on Blockchain, a value analysis for investment banks: https://www.accenture.com/t20170120T074124Z__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Consulting/Accenture-Banking-on-Blockchain.pdf#zoom=50
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