New feature release allows for investing without the need for a Web3 wallet

At Credix, we’ve recently rolled out smart contract-owned wallets (SCOW), making investing in our credit products as easy as sending USDC from your exchange of choice — no more need for web3 wallet solutions and custody infrastructures.

Our mission is to connect institutional investors with unique credit opportunities in Latin America, building on the most advanced technologies to achieve scale, and unlocking risk-adjusted returns through robust risk management and structuring capabilities.

Building on the most advanced technologies entails using blockchain technology to enable integrated accounting, settlement, and business logic — all in one atomic transaction. Hereby, we solve the reconciliation issue in financial services and eliminate manual interventions and errors.

The downside of building on blockchain technology is the need for a new kind of operational infrastructure to enable smart contract interactions. There’s a need for wallets to approve transactions and custody solutions to store tokens safely. For our investors, mainly large institutional funds and asset managers, this is a whole new paradigm. The majority is getting comfortable with the use of stablecoins and smart contracts for efficiency gains, yet setting up a wallet and custody infrastructure raises eyebrows and slows down the onboarding process.

Introducing SCOW: smart contract-owned wallets

You can think of a SCOW as a deposit address, with a hard-coded route for money flows. You can send funds from, e.g., Coinbase, Circle, Fireblocks, etc., to this address. Once the funds hit the SCOW, it automatically invests in the investment opportunity for which the SCOW was set up. Lastly, the SCOW also stores the exchange address of the investor, which is used to send repayments, so they settle on the investors’ exchange.

The below diagram shows the money and token flows for a SCOW investor (left) and a non-SCOW investor (right).

A similar setup is being used for the counterparty to the transaction. Once a deal is fully funded, the principal is sent to the exchange of the borrowing party. For deal repayments, an on-chain collection account is set up to which the borrower can make repayments. All without the need for Web3 wallets.

‘’The investment process is reduced to sending USDC to a unique smart contract-owned wallet (SCOW) address. No need for custody of LP/tranche tokens. Repayments automatically settle in USDC on the exchange’’, says Maxim Piessen, CTO at Credix.

In summary, SCOW brings a variety of improvements to the transaction flow:

• No more need for web3 wallet solutions, and custody solutions; bringing a substantial UX improvement to investors and borrowers
• USDC flows through our platform in a matter of minutes, shortening the time from fiat to fiat
• SCOWs have a hard-coded route for money flows: capital can only go from the investor’s exchange account to the correct investment opportunity and back; as enforced by the smart contracts
• As SCOWs are set up per transaction, per investor, we lower on-chain AML risks. Through our diligence partner, we receive the KYC/B confirmation from the investor before setting up the SCOW, and the capital originates from their exchange, eliminating the probability of commingling funds.

We’re excited to keep pushing the boundaries of innovation as we improve the user experience of our stakeholders and support institutional investors in entering the space.

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The information contained herein is provided for marketing purposes only and should not be relied upon for investment decisions. This is not an offer to sell or a solicitation of an offer to buy securities.