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Paving the Way for Crypto Financial Instruments

Paving the Way for Crypto Financial Instruments

By: John McLeod, Founder, JEA Associates Ltd.

Gabriel Dusil, co-Founder & General Manager, Adel Ecosystem Ltd.

Since Blockchain technology entered into 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.

iFin is a peer-to-peer Decentralized Cryptocurrency eXchange (DCX) based on Ethereum smart contracts, allowing peers to hedge, speculate or trade different cryptocurrency based financial instruments such as Spot, Swap, Forward, and Loans. It is a flagship project launched by Adel, a Blockchain technology incubator, providing finance and management expertise to companies looking for an alternative source of project acceleration. iFin is 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 platform, this DCX will evolve in step with rapid changes in the blockchain industry; its initial phase will offer a Crypto Spot financial instrument. iFin will provide a market for cryptocurrencies to trade 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. iFin aims 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 iFin looks to disrupt. This instrument is when two parties buy or sell an asset at a specified price on a future date. A crypto forward on the iFin platform 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 iFin 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. iFin enables traders to agree on when to buy and sell digital assets, currencies and holdings, when set parameters have been reached, and using the iFin token as collateral, referred in the platform as a “Risk Factor”

The impact of blockchain on traditional financial services will be huge. A recent report by Accenture1 cited that the world’s eight largest banks could potentially save 8 billion US$ on a cost-base of 30 billion US$, by improved centralize finance reporting, savings on compliance, operational costs and business operations. This cost saving doesn’t even take into account improved service times, stronger capital bases and greater accessibility for opportunities in unbanked areas of the world.

iFin aims to evolve crypto trading beyond banks that are rooted in legacy supply chains and physical infrastructure. This platform will be a digital interface where anyone, irrespective of their geolocation2, and experience, can login in, execute trades, and agree on smart contracts that suit their individual needs. By doing this, iFin aims to empower people to build their portfolio, without expensive intermediaries and weighed infrastructure inefficiencies. In building iFin as an agnostic blockchain incubator, Adel has made the first steps towards 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.

Banking on Blockchain, a value analysis for investment banks:

Adel continues to develop its operational, regulatory, and legal structure to allow for interaction, collaboration, and innovation, in a community-based model. The iFin project will adhere to legislation and regulations where required.

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