In the past 10 years since the introduction of the Bitcoin network, in 2009, the growth of the cryptocurrency market has accelerated. The acceleration has in large part been fueled by the unconditional faith among younger generations in cryptocurrencies. Inspired by this younger generation, an increasing number of institutional investors have also jumped into crypto trading and investing, including many heavyweights of the ﬁnancial industry. This upward trend will most likely continue into the near future as the cryptocurrency market gradually evolves into a marketplace for early-stage financing of blockchain-based ventures. However, compared to the traditional financial markets, the cryptocurrency market still has a long way to go to become a complete market with a diverse and complete set of cryptocurrency products. As suggested by Kenneth Arrow and Gerard Debreu, Nobel Laureates in 1972 and 1983, a complete market allows investors to trade on all future outcomes and the claims to the outcomes. It ensures all crypto products are fairly priced. Thus, market completeness is necessary and essential for the cryptocurrency markets to attract participations from investors with various objectives and expectations. Investre aims at contributing tothe development of a decentralized and disintermediated lending platform to facilitate the completeness of the cryptocurrency market. Investre’s cross-token clearing technology and innovative collateral management technique create an infrastructure for the future introduction of various cryptocurrency products to complete the cryptocurrency market.
The main service provided by Investre’s platform is crypto financing. This service resembles securities lending in the traditional financial services industry but in a disintermediated manner, without the involvement of primary brokers, lending agents, etc. Investre’s clients can transact on standardized borrowing/lending contracts in disintermediated crossing networks. They can also transact on non-standardized and customized contracts with preliminary matching facilitated by Investre and bilateral negotiation taking place in a secured virtual meeting room.
The key to the success of any crypto financing platform is crypto collateral management. A borrower wishing to borrow the preferred crypto needs to post collaterals of other crypto(s) with the lender. Maintenance collateral ratios are enforced to protect the lender so that the value of the transacted crypto will not fall below the value of collateralized crypto. To minimize the counterparty risk from high volatility of crypto prices, Investre also designs a second layer of protection for the lender by placing limit orders to liquidate transacted crypto and terminate the transaction before the value of the transacted crypto falls below the value of collateralized crypto.
However, unlike traditional financial markets where collaterals are managed by lending agents, Investre’s collateral management is completely disintermediated. Collateral ratios and collateral calls are managed by smart contracts. The escrow account of collateralized cryptos is safe-guarded by multi-signature three-party wallet. Two parties of the transaction own two private keys of the multi-signature wallet. Another private key is controlled by the collateral management contract to submit collateral adjustments. Two out of three keys are required to access any collateralized crypto in the wallet. Thus, Investre’s collateral management not only effectively eliminate the counterparty risk but also maximally ensure the security of collateralized cryptos.
Investre has five key and unique features that distinguish itself from other similar products. First, Investre is a decentralized and disintermediated platform with zero interference and involvement of intermediaries or centralized agencies. Investre does not keep custody of its clients’ digital assets. Instead, clients control their private keys and are themselves responsible for the safekeeping of the keys in their own wallets. This feature ensures Investre’s clients have maximum crypto security that has been a serious concern in any intermediated crypto services. In this respect, Investre differs from most current crypto financial service solutions, such as Blackmoon, or Iconomi, in which clients entrust their assets to a third party smart contract acting as custodian. Second, Investre provides all services based on peer-to-peer interactions which are self-governed by users of Investre. Through this design, Investre can guarantee that it does not gain any inside knowledge or advantage over its clients, or sacrifice any clients, especially retail clients, for its own benefit or that of partner institutions. Third, Investre provides both standardized and non-standardized products. The standardized products are provided to clients seeking liquidity in their transactions, and the non-standardized products are provided to clients seeking flexibility and customized transaction.
Investre expects to serve a wide range of users with various needs. For example, market makers, especially those making markets for relatively illiquid cryptos, need to perform their market-making function by borrowing cryptos to settle buy orders. Arbitragers need to borrow cryptos to sell short. Investors could seek liquidity enhancement to borrow liquid crypto with their illiquid crypto as collaterals. Entrepreneurs issuing news cryptos could seek diversification into other kinds of cryptos through crypto lending/borrowing transactions. More importantly, Investre’s disintermediated collateral management builds a trustworthy and effective foundation for future innovations in crypto products, such as derivatives, swaps, etc.