In the epoch which is characterized by the dynamic change and fluidity of all what is called “traditional”, the impermanence of some of the establishments considered to be solid in the past is now taken almost for granted. Exemplified by the possession of extensive market power, lack of innovative touch, amplified by the bureaucratic organizational structure makes the majority of traditional organizations lose the touch of the authentic customer needs, instead of maintaining a high level of focus on the internal organizational goals. Therefore, it’s no miracle that many financial institutions, including banks, are losing their knack in keeping up with the times.
To offset the widening gap between the customer and institution, the field of DeFi quickly and effectively showcased that democratization is a better approach to solving existing problems, and starting a new chapter from scratch is more expedient than rewriting the existing one. Emerging at the forefront of a growing revolutionary movement, ISSUAA came into the industry as a fast-paced adapter for those who are eager to engage in the world of finance without being exposed to the adverse legacy of financial institutions. By being a fully decentralized platform, not only in technology but also in governance, ISSUAA encapsulates all the traits financial institutions can boast of a wide range of investment instruments, including stocks, bonds to indices, as well as the security of the operation behind them. However, compared to institutions we all are familiar with, ISSUAA is taking it one step further and launches a protocol making derivatives of real world- and crypto assets tradeable directly on-chain, trustless and without the need of a central counterparty.
Synthetic assets: On the verge between the real world and crypto
With decentralized technology taking edge within the derivatives market, one of the key problems remains the overwhelming level of collateralization needed in available synthetic asset protocols so far. Certain platforms in DeFi space may have this requirement as high as 600% of the capital, which is factually working and generating returns in liquidity pools, making such protocols strongly lacking capital efficiency from an investor perspective. Therefore, ISSUAA came up with its own solution: instead of backing up the platform with additional investments served as collateral, thus making more investments necessary and losing capital efficiency, the platform allows investors to mint synthetic ISSUAA assets using stablecoins (USDC) pegged to the USD. In return, investors receive two digital assets: one reflecting the value of the real-world- or crypto underlying asset (long token), while the other is inversely related to the price of the instrument (short token), this way ensuring that the protocol and its assets are always fully funded, without the need of overcollateralization. Hence, in the ISSUAA protocol, every single USDC stable coin paid in by investors to mint assets and provide liquidity to the ISSUAA pools is “working”.
This mechanism gives rise to the token system governed by the ISSUAA Protocol Token (IPT) in the form of DAO, which is only assigned to investors who made their input in the form of stablecoins, minted long and short tokens of underlying assets and provided liquidity into the ISSUAA Asset pools – or otherwise, participating in the IPT/USD stable coin LP pool. In order to back up the IPT governance token with an ever growing “inner” value, the IPT is linked to the cash flows, i.e. a 0.05% trading fee of every trade on the ISSUAA marketplace is kept for the IPT token. Moreover, the supply of the IPT is capped at 100 million (max. supply), which makes the IPT rather deflationary. During the fair launch, as much as 60% of this max. supply of 100m IPT tokens is planned to be given out to the platforms’ participants, liquidity providers and participants in the ISSUAA DAO governance, over time.
ISSUAA Synthetic asset protocol pushes finance to a new frontier
It is noteworthy that ISSUAA proposes investors take advantage of the superior low-risk yield farming, guaranteeing the distribution of a 0.25% fee per trade back to the investors. Subsequently, this gets amplified by the 3% reward distribution out of 60 million IPTs given away as rewards for liquidity providers and governance voters on a weekly basis. (3% of what’s left from the 60m IPT tokens). Thus, in comparison to other platforms, investors seeking exposure to synthetic assets on-chain can perform worry-free and superior-return liquidity provision, while being assured that whichever price swing their asset undertakes next, it is safely backed up by the value of the mechanism.