The first iteration of decentralized finance (DeFi) projects, commonly called DeFi 1.0, laid the foundation of a decentralized financial ecosystem, especially for retail users. With DeFi 1.0 cementing itself in the lending, borrowing, and trading spaces, the next iteration, known as DeFi 2.0, aims to expand on the foundation already laid. To contribute toward DeFi 2.0 development and bridge the gap between traditional finance (TradFi) and decentralized finance (DeFi), Infinity Exchange has launched its testnet.
Built on the Ethereum (ETH-USD) blockchain, Infinity Exchange’s “Institutional Fixed Income Protocol” is designed to unlock new opportunities for DeFi via an infrastructure that runs complex computations and risk management off-chain before settling all transactions on-chain.
By taking this hybrid approach, the platform can overcome shortcomings associated with existing DeFi 1.0 platforms, like limitations related to transaction throughput, scalability, and other inefficiencies.
Besides hindering institutional adoption, the drawbacks of DeFi 1.0 also negatively impacted the user experience. To address these hurdles, Infinity Exchange will introduce institutional interest rate market mechanics and risk management techniques from brick-and-mortar finance to DeFi for the first time.
This Institutional Fixed Income Protocol deploys the same methodologies and achieves the same efficiencies as TradFi markets, particularly in the interbank lending market. As a result, it is well-equipped to accelerate institutional adoption and help total value locked (TVL), the DeFi industry’s measure of the total amount deposited in protocols, snowball.
Infinity Exchange Allows Traders to Hedge Risks
Accompanying its infrastructure, Infinity Exchange will implement the first-ever complete yield curve in the DeFi ecosystem featuring both floating and fixed rates. Through this, traders can hedge their rate risk and speculate along the entire term of the curve.
Furthermore, by expanding the list of investable assets within the yield curve, Infinity Exchange aims to lower the volatility and add more stability to the broader DeFi ecosystem, making it easier for investors to switch between more and less risky assets.
Besides the features mentioned above, the platform will also provide the infrastructure to help investors address a large selection of complex collateral, unlocking new opportunities for investors to engage in arbitrage across interest rate differentials between Infinity Exchange and other DeFi lending protocols.
Infinity to Support the Next $1 Trillion Crypto Market?
Through this approach, Infinity Exchange believes it can help unlock returns for $20 billion of investors’ TVL, which currently generates no yields on protocols like Aave, Uniswap, Curve, and Compound, and eventually support the next $1 trillion cryptocurrency market.
“In TradFi, institutional investors are more active in the fixed income markets than they are in the equity markets,” according to Infinity Exchange Founder Kevin Lepsoe. “If we want more institutional adoption in crypto, we need to first nail the fixed income markets and it starts here, at Infinity.”