The world has witnessed exponential growth in digital asset adoption over the past few years. With the market capitalization exceeding $2 trillion dollars today vs $500 billion just four months ago. A plethora of options are available to all financial market participants to buy and sell digital assets. Especially with the advent of digital asset availability on payment platforms like PayPal and across challenger bank accounts.
Why Alkemi Network is bridging CeFi to DeFi
Meanwhile, the decentralized financial ecosystem (where digital asset holders can earn competitive yields on selected allocated digital asset holdings) has ballooned with hundreds of projects now capturing tens of billions of dollars of locked value. However, participation is still comparatively low in DeFi. In other words, whilst many hold digital assets, only a fraction can actually earn a yield on those assets.
Why? Put simply, it’s because CeFi cannot frictionlessly access DeFi.
What does that mean?
In order to answer this fully, we need to define the separated worlds of centralized finance and decentralized finance and how they differ:
We can define Centralized finance simply as the traditional financial ecosystem. Where service providers custody client funds and act at their own discretion according to financial regulations. For example, a high street bank may hold customer assets as part of bank funds. In a labelled account and lend those funds to other institutions in return for interest (yield). Currently the traditional bank account interest rates offered to customers are historically low and reflect the rates set by the central banks.
Decentralized finance is an open system where participants custody their own funds in private digital wallets (i.e. self-custody) and may allocate their assets as they wish. Including to yield-generating protocols running on a public blockchain. These protocol’s composition is smart contracts that self execute and have been engineered to generate yields that are currently more competitive than those available in traditional savings accounts.
Centralized Financial Institutions
Centralized financial institutions are regulated by financial services authorities around the world and in various jurisdictions to protect customers. Banks/exchanges/funds custody customer funds and require verification so they can trust and have suitable mechanisms in place to serve the interests of consumers. In turn, these institutions collect users’ data to ensure their regulatory compliance.
Regulations Impact on DeFi
Decentralized finance is currently unregulated and as a result. Centralized financial institutions cannot allocate funds to the DeFi ecosystem and generate the yields whilst remaining compliant. Individuals who are not regulated by financial authorities have been interacting with the decentralized financial protocols.
So, the vast majority of the increase of digital assets allocated to decentralized financial protocols has been from permissioness, individual participation. Institutions have been unable to participate in the growth of DeFi due to capital, connectivity and control constraints and are excluded from participating in yield generation whilst remaining compliant.
The Solution: Alkemi
This is where Alkemi Network comes in. Alkemi has created the technology to enable centralized financial counterparties to plug-in to DeFi via a set of compliant on-ramps. CeFi institutions can now access decentralized financial structured products through the Alkemi Network portal via a KYC-permissioned liquidity pool. Centralized financial institutions, including exchanges, can offer their customers compliant access to DeFi, providing a KYC permissioned solution to anyone who doesn’t wish to self-custody their digital assets. For those comfortable with self-custody’ing their funds, who wish to participate directly, Alkemi also offers open access via a secondary, permissionless pool of digital assets.
In summary, Alkemi is bridging Centralized Finance to Decentralized Finance.
How does Alkemi work?
Alkemi has designed a decentralized liquidity network with a suite of tools and products that serve as onramps for everyone to participate in decentralized finance. The flagship protocol, Alkemi Earn (Earn), facilitates institution-grade borrowing and lending within a compliant environment via a primary ‘permissioned’ liquidity pool of digital assets (ETH, wBTC and stablecoins). Earn will also offer access to a secondary, ‘permissionless’ liquidity pool of digital assets at the network’s Token Generation Event. So this is part of Alkemi’s mission to enable everyone to join the decentralized financial ecosystem.
Alkemi is the first decentralized liquidity network on the Ethereum blockchain to offer both KYC permissioned and permissionless liquidity pools, governed by one single unique ERC-20 compatible network utility token, ALK. Alkemi technology utilizes Web3 innovation to facilitate the migration from the legacy financial system to the future of natively-digital capital coordination.
The Alkemi Network vision
The creators at Alkemi believe in a better world. The team believes in a place where flowing capital can be tapped by both institutions and individuals. So they believe in a world that can coexist more efficiently, more equitably, more sustainably, and more transparently. Furthermore, the only way to drive real mainstream adoption and realize the massive potential of a globally-accessible financial system, is through institutional adoption on-ramps. Alkemi is bridging CeFi to DeFi to facilitate the next wave of wealth creation powered by programmable assets.
For more information on how your organization can use Alkemi Network, contact email@example.com
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