Why We Invested: OpenDeFi

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At AU21 Capital, we are excited to announce our recent investment in OpenDeFi, a decentralized tokenization and fractionalization protocol for physical assets. OpenDeFi builds atop the OroPocket platform to offer rapid execution, flash loan origination, interest yields on collateral, and cross-chain support while allowing crypto investors to access direct exposure to real-world assets.

The Widening Gap Between Crypto and Institutional Finance

Over the course of the past decade, banks and conventional investors have developed a strong aversion to digital currencies and decentralized finance. Consequently, asset-backed securities markets and commodities trading are absent from the benefits of decentralized protocols, while the digital asset ecosystem lacks exposure opportunities to tangible assets. OpenDeFi argues that the current quasi-correlation between asset classes and related marketable securities are only figuratively representations of ownership — with no true correlation or meaningful recourse upon default, creating highly unstable financial systems. We couldn’t agree more, and expand below about how their product rectifies these externalities.

OpenDeFi: Bilaterally Conjoining Commodities Markets with Digital Assets

The OpenDeFi platform provides an elegant solution to bridge cryptocurrencies with tangible assets with high transparency and low execution latency.

  • Onboarding — Asset holders first directly tokenize their property and release their custodianship to an independent bailee. To ensure that the tokens remain representative of their underlying assets, collateral is audited daily and the contract’s value is fully insured for the period of time that it is taken under possession by a custodian.
  • Use Cases and Tertiary Transactions — From there, tokens representing underlying assets can instantly be exchanged for USD crypto-equivalents with nominal fees. Likewise, across all blockchains, users can originate low-rate lines of credit by posting their collateral-backed tokens for the duration of their loan indenture, or stake their collateral to yield interest. All of these transactions are currently executed by means of a smart contract, and OpenDeFi is working to fully decentralize the protocol through the integration of oracles.

OpenDeFi’s low barriers to entry, perpetual cross-chain compatibility, and security of principal provide the missing ingredients to grow the interactivity of institutional investors and cryptocurrency markets. By broadening the number of applications that real-world assets have in the cryptocurrency economy, and vice-versa, users will fortify the global financial system as a whole by diversifying their holdings and combining the transparent nature of DeFi with the appealing risk characteristics of collateralized securities. We are excited to work with OpenDeFi as they facilitate a new era of financial interoperability and introduce a novel avenue for commodities to be exchanged via blockchain.

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