Why Pledge Is Perfect For Traditional Finance
Pledge Finance is aggressively pioneering new possibilities in the world of DeFi, pushing the limits of financial innovation and creating a protocol that can serve as traditional finance’s entryway into the world of DeFi
Pledge is working to become a decentralized engine for all world debt instruments, and a feasible place where insurance companies, banks and other financial institutions with large amounts of capital can provide products like insurance policies, bonds, and fixed-rate loans.
But what makes Pledge the ideal gateway for traditional finance into decentralized finance? Here are five attributes of Pledge that make it perfect for attracting heavy investment from large institutions.
1.) Dramatically Lower Risk
DeFi is known for being a very volatile market environment. This scares away many financial institutions and private investors with large amounts of capital because they can’t afford the risk. Insurance companies and governments that issue bonds need to be certain that there will be a return on their money to avoid bankruptcy.
Pledge Finance has made a way for such institutions to enjoy guaranteed, fixed-rate returns over long periods, allowing them to enter the world of DeFi without over-exposure to the risk of market volatility. Using a novel liquidity curve that is flat in the middle, governments, banks, investment companies, and others can use Pledge to issue bonds, fixed-rate loans, credit swaps and other financial instruments while being confident in the returns which are algorithmically guaranteed.
By removing market volatility, Pledge has removed the largest barrier for large-scale investment, opening up not just Pledge but the whole DeFi ecosystem to vast amounts of capital that previously could not have feasibly been placed in DeFi because of the risk.
2.) Customizable Risks
Having fixed rates as opposed to the volatile defined market obviously decreases the risk exposure for large institutions and investors alike. However, because asset pools are algorithmically driven, and because Pledge uses a novel liquidity curve based on logit function, institutions are able to set yield curves that are acceptable to them. That is, they will have more flexibility in offering products that fit their customers without being constrained by artificial interest rates controlled by institutions like the Fed.
Insurance companies can offer products on what would be remunerative for them, and at more competitive prices. Investment companies can vary the interest they want to offer while giving their clients a low-friction way within Pledge to diversify their holdings into assets like real estate.
DeFi offers institutions and companies the freedom to be efficient and nimble, creating products that fit their resources, their customers’ needs, and the current financial climate.
3.) Rigorous standard KYC practices
The crypto world has an unfair reputation for being untrustworthy. However, most legitimate protocols do require a KYC process to verify customers and protect everyone involved.
Pledge takes this to a new level with innovative procedures. Pledge offers a wide range of compliance tools that will still preserve the privacy of the customer, opening the door for financial institutions to participate with DeFi without fear of penalties.
4) Monoline Insurance Protection For Riskier Loans
Pledge makes monoline insurance policies possible on the DeFi ecosystem and this actually is a really big upside for traditional finance as it enters the ecosystem.
Because the protocol makes possible monoline insurance, it invites speculators to provide insurance for riskier loans in exchange for a small fee. This ensures that financial institutions can offer riskier investment options to clients, and still be protected and have a lower risk profile than they would elsewhere in DeFi.
5. ) Engaged Users looking for Loans
Because pledge serves not only lenders but borrowers and liquidity providers as well, it requires an extremely nimble and flexible asset pooling mechanism so that it can accommodate fixed-rate loans, fixed yields, early liquidity pull-outs, equity mapping, credit swaps and more. It accomplishes this with its asset-driven liquidity pools that aren’t as dependent on supply and demand.
This means that there are already people looking for loans and other financial services on the protocol, and it will be easy and frictionless for institutions to find and serve these clients. They don’t need to craft their own protocol on DeFi and then promote it. By building something on Pledge, they are essentially setting up shop next to already engaged consumers.
Plus, Pledge allows regular investors to diversify their portfolios into non-crypto assets without portfolio rebalancing. There will be plenty of investors looking for services from larger financial institutions.
Conclusion
Pledge already has more than $10 billion in committed liquidity from various partners and investors, and we are working very hard to make that $30 billion. Not only is Pledge able to attract capital, but it is also led by a team that has between them more than 100 years of combined leadership experience in FinTech, structured finance, and algorithm optimization.
Many of our leaders, like CEO Tony Chen, have worked in traditional financial institutions. We are very aware of the needs that financial institutions have, and built Pledge with those needs in mind, and to accommodate those institutions. In other words, Pledge was built to support the load of heavy investment from institutional investors.
Because Pledge offers a safe haven from DeFi volatility while still preserving the freedom DeFi offers larger institutions to set their own terms, it is an ideal entry point for financial institutions into decentralized finance. Pledge also offers institutions a safe space from both regulatory penalties and illicit activity through its rigorous KYC process.
All these reasons make Pledge the perfect place for a financial institution to get started and decentralized finance. It allows them to be industry leaders in both worlds and take the financial system of the planet into the future.
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