Intro
The Wirex CryptoCredit Bridge is designed to empower users by providing them with the unique opportunity to access fiat currency credit facilities while simultaneously harnessing the capabilities of blockchain technology. Although the concept of borrowing stablecoins and other digital assets against crypto collateral has been well-established in a decentralized manner, applying a similar framework with fiat currency has proven to be more intricate and challenging.
Background
While certain platforms do offer services that bridge fiat money with digital assets, and several banking institutions have introduced relevant products, the fundamental challenge remains largely unaddressed. Existing solutions often operate off-chain, lacking transparency in the storage and management of collateral assets.
Wirex CryptoCredit Bridge
Wirex proposes a groundbreaking solution that diverges from the traditional approach. In our novel structure, collateral assets are placed into an on-chain pool, governed by a smart contract intricately connected to on-chain oracles.
The Wirex CryptoCredit Bridge tackles the following key aspects:
- On-Chain Collateral Pool: Unlike conventional methods, Wirex's approach ensures that collateral assets are securely stored on-chain, enhancing transparency, and mitigating risks associated with off-chain storage.
- Smart Contract Governance: Our smart contract, intricately linked with on-chain oracles, guarantees the integrity and reliability of the credit facility. This innovative governance structure empowers users with trust and transparency in the borrowing process.
- Seamless Integration: Wirex's solution effortlessly integrates the power of blockchain technology with the accessibility of fiat currency credit, creating a seamless bridge between the two worlds.
Three main phases of a credit such as Origination, Repayment and Liquidation of collateral illustrated below.
Main benefits of the Wirex CryptoCredit Bridge
For Users
- Comprehensive Visibility of Collateral Position: Users gain complete transparency into the status of their collateral.
- On-Chain Collateral Management: Users can effectively manage their collateral assets on the blockchain.
- Flexible Access to Fiat Credit Facilities: Users enjoy the flexibility of accessing fiat credit facilities.
- Tax Efficiency: The structure offers tax-efficient benefits to users because digital assets are not liquidated for fiat in the base case scenario.
- No Funds Commingling/Rehypothecation: Users' funds remain secure without any risk of commingling or rehypothecation.
- Transparent Source of Fiat Funds: Users can trace the source of their fiat funds, ensuring transparency.
For Banks
- Fully Collateralised by Liquid Assets Lending: Banks are assured of full collateralisation through liquid assets lending.
- Automated On-Chain Risk Management: The system automates on-chain risk management for banks, enhancing efficiency and reducing risks.
- Untapped Market Opportunities: Banks gain access to previously untapped market opportunities, offering a high-quality lending product.
For Wirex:
- Efficient Structure Combining On/Off-Chain Ecosystems: Wirex benefits from an efficient structure that seamlessly combines both on-chain and off-chain ecosystems.
- Attractive Use Case for Wirex Appchain: The CryptoCredit Bridge serves as an attractive use case for the Wirex Appchain, showcasing its capabilities.
- Innovative Product Benefiting the Blockchain Industry: Wirex introduces an innovative product that not only benefits its users but also contributes to the advancement of the blockchain industry as a whole.
The Wirex CryptoCredit Bridge represents a pioneering approach to accessing fiat currency credit facilities while harnessing the capabilities of on-chain technology. By placing collateral assets into an on-chain pool governed by a smart contract and oracles, Wirex addresses the challenges of transparency and security, setting a new standard in the industry. This innovative solution is poised to redefine how users access credit, enhancing trust, and transparency in the process.
Captive Tokenised Insurance
Captive Tokenised Insurance is a unique safeguard mechanism within the Wirex CryptoCredit Bridge, providing security for on-chain fiat credit facilities. It operates through an insurance pool established by Wirex. This insurance pool, known as the CIP, holds digital assets and is notable for its tokenized representation of these assets. In the event of an adverse occurrence, a seamless process is initiated: the CIP tokens are exchanged for digital assets, and subsequently, the СIP tokens are redeemed and permanently removed from circulation through a burning mechanism.
The governance of this entire process is intentionally designed to be decentralized, ensuring that stakeholders have the authority to vote on crucial decisions. These decisions are made based on verified facts provided by the network and oracles, fostering transparency and trust within the Wirex CryptoCredit Bridge ecosystem.
In future iterations of this product, we are planning to extend invitations to additional Liquidity Providers (LPs) to join the CIP. This collaborative expansion will offer LPs the opportunity to participate in the CIP, enabling them to receive a portion of the insurance premiums collected.
This strategic move not only strengthens the robustness of our insurance ecosystem but also opens up new avenues for LPs to benefit from their involvement in the Wirex CryptoCredit Bridge.