Multiple Applications of MultiSwap

Written by: Alg Ore and John Liu

Fusion kicked off 2020 with the release of its long-awaited MultiSwap enhancement to Quantum Swap. In short, MultiSwap enables creation of a many-to-many asset swap within a single transaction. While certainly a powerful addition that “sounds cool”, does MultiSwap have real applications in enabling financial exchange, both in everyday life and in financial markets? In this article, we share 4 use cases that once again shows the diverse and practical application of Fusion’s solutions.

Retail Shopping with Digital Currencies

To enable mass adoption of digital currencies, blockchains must be able to support the needs of everyday financial transactions. So, let us start with reimagining the shopping experience, powered by blockchains and digital currencies.

Today, when customers enter a store (or shop online), they usually buy multiple goods or services. Customers walk around the store, picking up and/or scanning the items and finally checkout at the register in one transaction with one payment.

Now, imagine this same experience, powered by Fusion’s blockchain, MultiSwap, and digital assets. All products are linked to underlying digital assets, benefiting from the blockchain efficiencies brought to supply chain and inventory management. Using a mobile device, customers scan each item as they load into their basket. Unseen to the customer, at the blockchain-level the device generates a MultiSwap with all items on the Receive Side of Swap.

At checkout, using the device, customers choose what currency they want to pay in, which fills the Send Side of the swap.

A private swap is sent to the store and the store completes the purchase and assignment of ownership in a single transaction. Simultaneously, inventories are updated, triggering other automated actions such as placing additional orders, sending promotions, and more.

Just using a different blockchain with regular 1:1 swap would require multiple swaps — one for each purchase. The result is increased complexity and fees. Alternatively, it would require rolling the underlying goods purchased into one entry of “goods purchased”, obfuscating away useful information and limiting benefits of automation.

While self-scanning and cashier-less checkouts might seem a futuristic use case, the world is already well on its way to make this use case a reality. Take Amazon Go as an example, completely eliminating scanning and registers with the help of visual sensors, deep learning, and mobile devices to provide customers a seamless pick-and-go experience. The trend to self-service across stores and restaurants will increase the demand for solutions like MultiSwap.

Batch Trading of Digital Assets

Our next example, addresses the use case commonly associated with cryptocurrencies today: the trading of tokens with each other, such as BTC to ETH or ETH to USDT. As participants in the crypto market diversify their holdings — even just within the top 50 coins, stablecoins, and the imminent government issued digital currencies — exchanges involving multiple assets will become the norm.

Consider a scenario where an investor is looking to liquidate a portfolio consisting of a large number of different assets. This person is prepared to pay a premium for the convenience to let someone else to do heavy lifting required to trade all of the assets separately. The investor issues a MultiSwap for all of the assets on the Send Side of the swap and Bitcoin on the Receive side at a discount, and other willing investors can take the opportunity.

Or take another example, where an investor needs to diversify their BTC into a mix of stablecoins and cryptos: 25% USDT, 25% EURS, 25% ATOM, and 25% BNB. Certainly, they can go to a liquidity provider, individually place these four orders, and deal with headaches on slippage, not to mention the individual exchange fees. Alternatively, they can send a MultiSwap to the liquidity provider, with the set ratios and save both sides the logistical headache.

Loans Modeled with Quantum Swap and Time-Lock

The Fusion blockchain with its tools Quantum Swap and Time-Lock are purpose-built to cater to the financial industry. As we have shown before, modeling loans with Time-Locks presents distinct advantages in both being able to replicate the cashflows associated with the financial instrument, and being able to trade these cashflows with ease.

In short, with tokens issued to represent both the cash asset and the debt (that is, a claim to the lent amount), each interest payment and principal payment can be created by time-locking the debt token to the respective payout periods.

What does this transaction look like in execution when a loan is issued, or when people want to buy a bond? Let’s take an example of a one year bond that pays quarterly with 10% annual interest. The borrower receives $1,000 (represented by CASH token) today, in exchange for the claims on cash payments (time-locked DEBT token) from the investor.

With MultiSwap, both the complexity and cost of issuing the loan is kept to a minimum due to having everything done in a single transaction.

Options Trading

We continue our journey deeper into finance and take a look at options trading. Options are contracts that give the owner right to either buy (Call) or sell (Put) an asset on or before a specific date at a predetermined price (Strike). Many trading strategies are can be created by combining different options with their underlying collateral.

We will focus on one strategy called a Straddle. A straddle combines the purchase of a Call and Put to let buyers benefit from large movements in price, either up or down.

While certainly, investors can purchase the individual legs of the trade (leg 1 = Purchase Call, leg 2 = Purchase Put), the most common approach to limit transactional risk is to purchase these legs simultaneously from a single party. Again, a straddle swap is perfect use case for Fusion’s MultiSwap.

A Diverse Feature for Everyday Use and Financial Markets
In our everyday financial purchases, we take for granted that most of our transactions are not single asset purchases, but multiple asset purchases. Financial markets today, take for granted that a single trade often involve multiple assets all needing to be done at the same time with different ratios. Fusion’s MultiSwap enables these types of transactions, while reducing complexity and fees. What use case will you think of?