Formosa Financial <> Compound Partnership Announcement- 寶島金融合作夥伴宣佈
For most fiat currencies in the world, interest rates are set as a matter of monetary policy by their issuing authority — typically, a country’s central bank. In turn, commercial banks holding reserves are able to borrow funds from the central bank at this set rate, and then subsequently lend those same funds out to consumers and business customers to earn a profit and capture interest rate spread.
This system works thanks to a hub and spoke model which relies on centralized trust between lending and borrowing institutions. In situations where simple trust alone isn’t sufficient, borrowers are required to post collateral to lubricate the continued flow of credit within the financial system.
In the current blockchain ecosystem, lending and borrowing of crypto assets hold some distinct similarities with traditional money markets. Like the system described above, exchanges act as centralized hubs of trust connecting borrowers and lenders. Of course, the crypto assets being furnished through exchange-based lending facilities don’t have their market availability determined by sovereign monetary policy but rather through algorithmic mechanisms that can encode capped or inflationary supply designs (think Bitcoin versus Ethereum here). Beyond the decentralized nature of blockchain networks themselves, removing the middle man to create trustless, peer-to-peer money markets is a necessary next step.
Today, Formosa Financial is proud to announce our partnership with Compound. The launch of algorithmic money markets is an important milestone in the ongoing maturation of crypto asset markets that we are incredibly excited to be a part of. We are eager to work with the Compound team to integrate the protocol into our platform so our clients can tap into the vast possibilities enabled by this innovation.
Here are a few of the use cases we are eager to support on the Formosa Financial Platform:
-Earning interest on ETH deposits, with an algorithmically determined rate based on market supply and demand on a block-by-block basis
-Establishing money markets for clients’ own ERC20 tokens through deployment and administration of new smart contracts; this will enable new modes of market access and utility for tokens and their dApps
-Borrowing of ETH to finance investment into new token projects and other forms of on-chain activity
To start, Formosa Financial has committed to lending ETH on Compound Protocol as we familiarize ourselves with the mechanics of the technology and the market itself. We look forward to working with the Compound team and our clients to promoting this system as the best way to unlock the time value of crypto assets and the multitude of other potential innovations this will bring forth.
We’ll be sharing more posts on blockchain and the Formosa Financial platform on our official website https://www.formosa.financial — An institutional grade digital asset management tool for blockchain innovators.
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