Formosa Financial Integrates Custody and Decentralized Lending with Bitgo and Compound
Formosa Financial is proud to announce the release of a core piece of market infrastructure with the integration of the multi-billion custody market and the multi-million decentralized lending market. The successful integration of Bitgo and Compound Protocol creates a seamless solution for enterprise-grade custody of crypto assets with decentralized funds management. With just a few clicks on the Formosa Financial Management Platform, more than $15 Billion in monthly transactions from Bitgo can now instantly access Compound’s lending markets to earn interest on their balances.
With Formosa Financial, it is now possible to easily deploy funds from the world leader in crypto asset security and custody to the world leader in decentralized financial services.
Delivering a Mass Market Solution
With the integration complete, Formosa Financial has delivered a critical piece of market infrastructure that provides an on-ramp for the institutional market; mostly large investors, OTC desks, exchanges, and companies holding crypto assets to safely and easily use decentralized financial products. While extremely useful to have access to liquid money markets for crypto assets, to date adoption of these products have been hindered by the technical know-how required to use them.
Clients will now be able to take advantage of regulated third-party custody while earning interest on their latent crypto assets by taking advantage of the Formosa-managed connection between these two industry leaders. This integration will enable the mass market to tap into DeFi for the first time. The mass market cannot manage the user complexity inherent with most blockchains and cryptocurrencies today. We solved this problem by creating easy access and use of two of the highest products in demand today, secure custody services from Bitgo and the instant lending market from Compound Protocol. Thus, we are the safest and fastest platform that anyone can use to earn interest on their crypto assets.
A Model for CeFi/DeFi Solutions
The structure of today’s crypto markets are characterized by a growing separation of products and services that cater to different market segments. We’ve taken the best of what the centralized and decentralized crypto industry has to offer and created a single one-stop solution for clients.
The integration of enterprise-grade custody and decentralized products is one of the first real CeFi/DeFi platforms that exists today. Formosa Financial now meets the standards of both institutional clients and the large retail market.
A great overview of CeFi and DeFi can be found in this article on the Totle Blog.
Centralized finance (CeFi) is the segment of the industry where it’s best to place your trust with people and institutions. Common CeFi services and use cases are best used include exchange and OTC trading to tap market liquidity and ensuring the safety of funds by using a qualified custodian. Bitgo has the highest security rating of all crypto custodians and is the go-to choice for several of today’s main institutional players in the global crypto industry. The company has over $2 billion in assets under custody.
Decentralized finance (DeFi) is a completely different segment where trust is best outsourced to the programs running on blockchains themselves. DeFi services enable users to access financial products instantly and more efficiently than the CeFi market is able to create. Automation via smart contracts is another benefit for DeFi products which quickly enables participants to gain access to financial products without restrictions such as undergoing lengthy KYC processes and other compliance measures which are critical for CeFi related services to operate compliantly. Compound has emerged as both an industry pioneer and leader in the DeFi market.
A union between CeFi and DeFi has several benefits, most notably for Formosa Financial as it moves towards an agile state for further development. We benefit from providing a new killer feature to the existing user base and supported assets offered by both Bitgo and Compound — whose clients already understand the value of custody and decentralized financial markets. Our integration solution makes these products and services more accessible and easier to access.
The User Friendly Choice
For everyone in the blockchain industry, managing crypto assets is both a challenging and risk-laden activity. Do you buy the dip? Hodl ETH? Trade LINK? Add the growing complexity with banking services and you quickly find yourself spending most of your time comparing financial models and less of it actually actively managing your assets. Most people tend to just buy and hold, where Compound creates the opportunity to gain a Return on Holding.
Previously, people wanting to access Compound Protocol needed to utilize Web 3 wallets or other Web 3 solutions such as MetaMask. Given the technical complexity and the time required to set up transactions with Web3 services, the market size is quite limited as the overall majority of the crypto industry prefers a mass market ready, simple user interface solution which can be trusted. In fact, MetaMask, the most popular Web3 solution, has approximately 1 million users compared to the 36 million people globally who own cryptocurrency.
Formosa Financial’s direct integration from Bitgo’s secure custody to Compound’s open markets for lending and borrowing represents a major opportunity to increase the user base on Compound through this user-friendly, 1-click service to access DeFi products for institutional clients. Currently Formosa Financial supports ETH, USDC, and single-collateral DAI lending markets with further additions planned in our roadmap.
About Bitgo
With over $2 billion in custody, BitGo eliminates risk and increases transparency in the digital asset markets by providing the most secure and compliant custodial and liquidity solutions for the institutional market Bitgo is the industry leader for secure crypto asset custody, it is the largest processor of global bitcoin transactions, accounting for 20% of all Bitcoin. Across all cryptocurrencies, Bitgo processes $15 billion transactions per month and is the chosen partner by hundreds of exchanges, 40% of the top performing crypto funds, and other institutional clients across 50 countries.
Bitgo is a regulated, compliant custody solution which holds over 250 crypto assets which represents over 75% of the crypto asset industry. The company offers flexible wallet configurations for a range of business needs.
About Compound
Compound enables users to lend and borrow cryptocurrencies by creating lending and borrowing “markets” where the lending and borrowing demand algorithmically sets the interest rate dynamically, block by block. Compound is one of the industry leaders in the multi-million DeFi market and is set to greatly increase in size as the barriers of use continue to fall. As of the date of announcement, Compound Protocol had $120 million in assets across eight crypto asset markets.
Compound enables you to hodl cTokens, which represents a specific crypto asset plus the interest earned from the open lending markets they are supplied to. Through the open, algorithmic money markets, interest rates are floating based on real-time supply and demand. The longer you hold the cTokens, the greater their value will be.
Proceed with Caution
DeFi apps do have risks and as an algorithmically-led process, there may be periods in which an error occurs within Compound Protocol leading to financial loss(es).
Compound Protocol in response to these risks have placed great emphasis on security and liquidity through sudden changes in market performance. From the company website. “ The Compound protocol was developed based on security principles and formally verified using Certora ASA (Accurate Static Analysis), which is integrated into Compound’s continuous integration system.
The company has had seven distinct code audits performed, maintains an active bug bounty program, and is the only DeFi project to release a “Market Risk” report. Code Audits are provided by Trail of Bits and OpenZeppelin which help to continuously maintain the overall robustness of Compound Protocol. Public audits can be found here.
About Formosa Financial
Formosa Financial is a one-stop platform for cryptoasset management, offering a customizable suite of custody, brokerage, and hedging services. By offering comprehensive services through one simple interface, the Platform reduces friction in managing mission critical tasks. Cryptoassets are both seamlessly and securely managed via institutional-grade third party providers. Our mission is to deliver mass market solutions for the growing crypto asset market.
