The decentralized finance (DeFi) industry continues to grow by leaps and bounds. In a span of four years, the space has grown into one of the leading ecosystems in the digital currency space as millions of users engage in lending and borrowing without having to go through a centralized intermediary like banks and financial institutions.
A new addition to the space is Infinity Exchange, a DeFi exchange platform founded by a team of Wall Street financial engineers, traders, quants, and technologists reinventing permissionless finance for institutional usage.
Infinity Exchange has just launched the testnet for its Institutional Fixed Income protocol. The new protocol will leverage Ethereum’s network security while performing computations and risk management off-chain.
Fueling DeFi Industry Growth
Despite a stellar first half of 2021, decentralized finance (DeFi) has seen its Total Value Locked decline month over month. Part of that momentum ties into all crypto markets shedding value. However, there is still a need for more institutional-grade solutions, which have remained relatively elusive in the DeFi vertical. Addressing that lack of institutional-level solutions is tricky, but Infinity Exchange offers a glimpse of the future.
The growth of decentralized finance hinges on bringing in mainstream users, investors, and traders. DeFi, in its current form, primarily caters to cryptocurrency enthusiasts and risk takers, rather than providing financial inclusion and a level playing field. Catering to the needs of institutional solutions and bridging the gap from TradFi to DeFi remains the top priority. Once institutional money pours into decentralized finance, liquidity can increase exponentially.
The lessons learned from the first generation of DeFi solutions will pave the way for next-generation protocols. The Infinity Exchange team is convinced trillions of dollars in assets can be tokenized to be used in DeFi. Infinity Exchange Founder Kevin Lepsoe adds:
“The crypto fixed income markets should be 100-times what they are today and we’re taking the first two steps in that direction. We’re introducing an institutional-quality interest rate protocol that aligns with theoretical finance, all while taking a comprehensive approach to risk management. If we want more institutional adoption in crypto, we need to first nail the fixed income markets and it starts here, at Infinity.”
The Infinity Exchange Approach
To usher in the DeFi 2.0 era, Infinity Exchange will introduce a Floating Rate with a zero bid-offer for both lending and borrowing. That concept is well-known in traditional finance and has generated a tremendous market since its inception. Translating that popular concept into a more decentralized market approach is an important first step.
Furthermore, the Infinity Exchange protocol introduces a complete yield curve in DeFi with floating and fixed rates. It is the first yield curve to come to decentralized finance, allowing traders to hedge their basis and rates risk and speculate along the maturity curve from start to finish. More assets to invest in along the duration of the curve can lead to lesser volatility, bringing much-needed stability to decentralized finance.
Topping it all off is the array of complex collateral capable of generating yield. Traders could, for instance, arbitrage interest rate differentials, something no other protocol provides. The team expects these outside-the-box opportunities to unlock over $100 billion in Total Value Locked creation. In addition, the approach could drive DeFi interest rates to risk-neutral levels over time.
The Institutional Fixed Income protocol leverages the Ethereum blockchain, the primary network for building decentralized finance applications. By building on that technology stack, Infinity Exchange can establish a crypto-based fixed income market and bring more liquidity to the broader industry.
