Want to Transition from TradFi to DeFi? Try Wrap Protocol
The Total Value Locked (TVL) in the global DeFi market currently stands at ~US$66 billion — an impressive number from when it first hit the US$1B milestone in February 2020. The current ~US$66.2 billion TVL is only a fraction of the ~US$1.55 trillion global crypto market cap and it speaks to the untapped potential of DeFi to become the future of finance as crypto continues on the path to unlocking mass-market adoption.
Much of the TVL in DeFi seems to be from retail investors, but the news chatter indicates that institutional investors such as UBS, Bank of America, JP Morgan, and Goldman Sachs, among others, are actively exploring opportunities in the emerging world of DeFi across governance, venture funding, and asset management.
In fact, just recently, news broke that Goldman Sachs has filed an application with the U.S Securities and Exchange Commission (SEC) for the “The Goldman Sachs Innovate DeFi and Blockchain Equity ETF” to provide exposure to companies in the DeFi and broader blockchain industry.
In this post, we explore how DeFi is the future of financial services and provide our thoughts on why and how institutional investors can dip their toes into the exciting world of DeFi.
Why DeFi is the future of finance
DeFi is gradually pushing the world of finance from traditional non-yielding assets to yielding assets with inherent interest-bearing functionalities built into them through products such as staking, lending, liquidity mining, and farming. One of the reasons DeFi is becoming increasingly attractive to institutional clients is its transparent, completely permissionless, and disintermediated nature.
DeFi is replacing antiquated and expensive financial infrastructure with elegant and autonomous smart contracts running on public blockchains and is loaded with the potential to redefine the way value gets created and exchanged around the world.
Additionally, DeFi assets have proven that they can deliver larger returns than traditional assets. Hence, for institutional clients, money managers, hedge funds, and family offices who want to outperform traditional assets, putting a fraction of their assets under management into the nascent DeFi market is a strategic move that introduces a speculative element without much correlation to the traditional markets into their portfolios. For instance, the Liquidity Mining Program on Wrap Protocol delivers as much as 195% APR or 600% APY on some pools.
Click here to get started with Liquidity Mining
Perhaps the biggest reason DeFi is the future of finance is the modular nature of DeFi that allows you to stack up different DeFi applications or services to maximize the return of your assets. For an example of how to do this, read How to Earn 600% Annually on WRAP Farming on Tezos.
Wrap Protocol’s Positioning for Institutional Investors interested in DeFi
Wrap Protocol is setting the pace for an open financial system by serving as a decentralized solution that makes Ethereum tokens usable on the Tezos blockchain to enable anyone to wrap ERC20 tokens into native FA2 tokens on Tezos. Some of the core features that make Wrap Protocol the perfect starting point for institutional clients interested in DeFi include;
Cross-chain transfer of assets
At its core, Wrap makes it easy for all users, including institutional clients, to move their crypto assets from one blockchain to another. Through Wrap Protocol, users can now wrap their ERC-20 assets into FA2 tokens for use on the Tezos blockchain, as well as unwrap the FA2 tokens back into ERC-20 tokens for use on the Ethereum blockchain.
In practical terms, users can shop around for the best DeFi opportunities across different blockchains, and if they find better deals on Tezos, they could easily move their Ethereum assets over to Tezos without having to worry about the inherent volatility risks for selling assets on one blockchain to buy new assets on another.
Institutional-grade DNA
Wrap Protocol is founded by the same team that built LGO, an institutional-grade exchange in the crypto market that became the largest ICO in France before it was later acquired by Voyager Digital in 2020. At the time of the acquisition, LGO was already home to more than 80 institutional clients from 20 countries, and it had regulatory compliance in the U.S and in Europe
Equipped with the expertise and experience of building institutional-grade decentralized solutions, Wrap Protocol is being built from the ground up with adequate consideration for managing regulatory compliance, walking the line between identity and anonymity, and ensuring the security of user funds — all within a user-friendly interface.
Independently Audited Smart Contracts
Wrap Protocol is on a mission to become a self-driving decentralized open finance platform in which all transactions from buying, storing, investing, lending, and borrowing assets are managed by smart contracts available 24/7/365, autonomously and transparently. Therefore, it is important that the smart contracts behind the transactions are subject to the highest level of rigor through security audits.
The smart contracts on Wrap Protocol were last independently audited in June 2021 at the request of the Tezos Foundation. The auditors noted in the Code Quality part of their findings that the smart contracts are well written and organized using a well-known and audited standard to implement safe transfer, safe math, and domain separation in accordance with best practices. You can find a copy of the audit report here.
A ‘Red Ocean Opportunity’ to Unlock a New Investing Edge
In traditional finance, an investing edge refers to something that gives fund managers an advantage over other investors. The investing edge might show up in information asymmetry in the market, superior computing speeds, or smarter algorithms among other things.
The next frontier of investing edges is in the world of decentralized assets and fund managers who step into the Red Ocean opportunities that DeFi provides will be considered geniuses similar to the first set of traditional money managers that embraced the investing edge that the Internet provided through electronic markets and automatic order execution.
Interested in some more information about DeFi and Wrap Protocol?
Read: What are wTokens (Wrapped Tokens) and How Do I Use Them in DeFi
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