Why Bridging TradFi with DeFi Isn’t Enough — We Need Integration

An Interview with Featured Contributor, Philipp Pieper,

Co-founder of DeFi exchange, Swarm Markets

Image courtesy of Coin Telegraph

Some may argue traditional financial infrastructure is sufficient, so why do we need DeFi at all?

DeFi is tackling some of the issues that have always been on the radar of financial services firms, regulators, academics and consumer groups. Disintermediation is a way of solving excessive cost, time and layers that get in the way of financial services transactions.

We find ourselves in a perfect storm where historically low interest rates and acceleration in digital transformation is pushing more and more financial participants towards the benefits that DeFi offers, which can’t be achieved using traditional financial market infrastructure.

So why isn’t everyone moving over to the Blockchain?

Media headlines are plagued with stories of regulators across the globe shutting down crypto exchanges and platforms that don’t meet their requirements. We’re at an inflection point where the risk of dealing with an unregulated exchange and trading with unverified counterparties and in illegal assets are preventing people from deploying collateral onto the blockchain.

Because of this, a lot of investors and capital are sitting on the sidelines waiting to enter the DeFi ecosystem.

How is Swarm Markets responding to this?

Swarm Markets is the first BaFin-regulated DeFi platform that will enable new market participants, capital and assets into the ecosystem. We’re skating to where the puck is headed by offering a fully licensed platform that will allow retail and institutional traders to trade digitised real-world assets alongside crypto for the first time.

By having a compliance layer that enforces governance and regulatory standards and connects people’s identities to the platform, we’re able to provide a safe environment that removes counterparty risk at the same level of security that BaFin requires other financial institutions within their purview.

Our regulatory status means we can do things others cannot. By holding crypto custody, agent broking, trading on own account and commission business licenses from the Federal Financial Supervisory Authority (BaFin), we provide a safe haven for investors who can trust the assets they’re trading and the counterparties they’re trading with, protecting them from illicit activities like rugpulls.

So how does Swarm Markets differ from other platforms that are offering KYC?

We’re more than just a DEX with KYC.

Our regulatory status means we can add new elements to the DeFi ecosystem. Swarm Markets provides a venue for networked liquidity using self-custody so asset holders have more autonomy over the financial marketplaces they want to create and trade on. No longer will centralised entities decide what can and cannot be traded. To that end, we’re helping to bring liquidity to previously illiquid assets. And by bringing more real world assets on-chain, we can expand the DeFi ecosystem by 10-100X.

There’s no other DeFi platform where a hedge fund or bank can stake and trade their assets, earning passive income through yield farming, whilst providing shelter from the instability of unregulated actors.

What’s the current status of the platform?

We’re currently onboarding over 1,000 individuals signed up to our liquidity provider programme who have pledged an aggregated amount of over $45 million in assets. Onboarding will be opened to the public fully later this summer.

We’ve also launched a payment token, SMT, which will power transactions on the platform. Token holders receive greater rewards when they add liquidity and save on protocol fees when they swap assets. Over 1,000 people took part in the public token sale across Launchpool and Gnosis Auction. Swarm Markets finished as a top 5 project on Launchpool by the end of the pre-sale and was over three times subscribed, beating some of the most prominent projects on the platform, including Bumper, BTC Proxy, Greenheart CBD, Singularity DAO and UniFarm.

SMT is available on Uniswap, which has seen healthy interest from the community and we don’t impose any trading restrictions on this.

In your view, what does the future look like for DeFi?

In the future, there will not be a difference between TradFi and DeFi, rather everything integrates as 'Fi'.

We will have achieved our goal of creating one unified and healthy financial market infrastructure, when people will access financial products and services and without even realising they're on the blockchain.

And the vision for Swarm Markets?

We’re not bridging TradFi with DeFi - we’re integrating it.

At first the platform will feature a standard AMM function enabling asset swaps, liquidity provision into pools, fee discounts for SMT token holders and rewards for liquidity providers.

We’re starting with an exchange and will be launching a whole suite of financial products and services - some of which will be world firsts. We’re working with custodians to bring tokens backed by real assets to the platform, including commoditised NFTs and public stock listings. Next year, we will have onboarded over 1 million users.

This is an evolution. As more data moves on-chain the capabilities of blockchain technology will evolve, facilitating greater fluidity in global markets. Consequently, Swarm Markets will offer more services enjoyed in the traditional financial world, executed on the blockchain and removing the need for intermediaries.

For more information on Swarm Markets’ liquidity provider programme, please visit their website.

You can find more details on SMT here.

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