The Force Protocol project, also called distributed crypto-financial services protocols, which is an open source blockchian platform, offers crypto-financial services solutions to developers. It offers cross-chain technology backed decentralized crypto-financial services with the under-layer standard data network of protocols. The project offers development convenience for decentralized finance applications through its SDK toolkit and APIs resources towards DAPP development and operation. This platform offers solutions for financial needs such as cross-platform assets transaction, shared trading volume, cross-chain communication, multiple blockchian crypto-assets collateral backed stablecoin issuing, token bonds issuing, on-chain payment, settlement and clearing of transactions, etc.
The Force Protocol builds a common development platform for decentralized financial services development in distributed finance ecosystem. This project offers data communication standard and development frameworks for financial services in distributed networks. Help crypto-assets realize safe and high efficiency value inter-actives in a uniform framework.
At present, there are many projects that claim to be Open Finance and build a decentralized financial ecosystem. Some projects choose to build a large and complete underlying infrastructure and then develop corresponding on-chain services. However, the software development model has an important impact on whether the product can adapt to the market. Because human beings have cognitive limitations on the development of science and technology, the products developed by the so-called comprehensive architecture tend to lag the development of trend, causing inconvenience to users, even be eliminated by the market. Therefore, this development idea is not suitable for The Force Protocol team. We chose to implement the scenario in a decentralized manner based on the specific financial application scenario. Then, by abstracting the various business steps, we developed the relevant modules required by the common protocol in the corresponding scenario, and through rapid version iteration, the application provides a development kit and a set of callable interfaces. In this way, it is guaranteed that the functions provided by the protocol layer are in line with the needs of practical applications, promoting technological development in related fields.
The first financial application scenario supported by The Force Protocol is decentralized lending. Along with the development of the loan scenario, the financial development will be based on market demand and technology development, provide development tools such as stablecoin, token bonds, payment, on-chain settlement and clearing, etc.
Scenario A: Decentralized lending service based on cross-chain technology
There are two main reasons for choosing lending as the first application scenario of The Force Protocol.
First, the phenomenon of lending has a long history in human society and is the basic demand in economic activities. In the blockchain network, the demand for borrowing for crypto-assets still exists. The combination of financial technology and the internet has spawned a series of internet financial services represented by P2P loan. However, with the development of Internet finance, its inherent drawbacks are gradually beginning to have an impact. The pain points of the internet finance business include:
· The platform is over-centered;
· The centralized database makes the transaction records easy to be forged;
· Some platforms move funds at will;
· The P2P company close down frequently;
· The default collection costs are huge;
· The unsecured loans lead to huge investment on risk control;
· Even strict risk control cannot avoid default bad debts;
· The underlying assets of bad debts are difficult to sell, etc.
With the advancement of decentralized financial technology and the transfer of physical assets to crypto-assets, for lending based on crypto-assets, because of its advantages such as ledgers are consistent and cannot be falsified, the underlying mortgage assets have strong liquidity, zero collect costs, etc. It will subvert the internet financial industry and even transform the traditional lending model. With the continuous improvement of the technical architecture, industry of lending based on crypto-assets will have its outbreak soon, to improve it’s development, we chose this track for our project.
Secondly, the founding team of The Force Protocol has a strong finance background. The co-founder Allen has been engaged in equity investment in the fin-tech industry for many years. He has a unique understanding of the industry, rich experience and deep industrial resources. At the beginning of knowing about the blockchain, our team realized that blockchain technology has inherent advantages in solving traditional financial problems. Blockchain technology will profoundly affect the traditional financial industry and even rewrite the strategic layout of most financial companies. We think that instead of passively accepting the impact of this new technology that represents the future, it is better to take the initiative to meet it and take the initiative to create the revolution by ourselves. From the beginning of 2017 to the end of 2018, Allen led the founding team of The Force Protocol to invest in more than 60 projects in the Open Finance field. Focusing on the vertical segment of crypto-loan, the team deeply studied and discussed the changes which blockchain brings to the lending industry, and made a full analysis and layout investment on the development status of the crypto-loan projects.
With the idea of “code is the law, privacy is the freedom, computing is the right”, the investment portfolio covers the complete ecology of crypto-loan field, from cryptocurrency lending projects to blockchain lending projects, from underlying public lending chain projects to the actual lending DAPP project. The team has invested in DCC (credit public chain), ETHLend (borrowing application), LBA and other projects. During the research and investment process, the team found that blockchain technology can better solve the trust problem in financial transactions. The lending industry will be one of the earliest industries which could be realized in the blockchain technology. But the lending ecosystem based on blockchain and cryptocurrency still has a major gap: how to systemize the lending framework, modularize DAPP development demands, how to use distributed models to transform traditional centralized operations. So, we started to set up a decentralized finance protocol, based on real problems, and decentralized lending has become the first breakthrough of The Force Protocol.
There have been a few of lending DAPPs based on the blockchain network in the global market. However, the orders on DAPPs are not shared. As a result, a limited number of lending orders are spreading across different platforms and there is an inequivalence between the supplies and demands, which hinders the future growth of lending market. In addition, there are many users (e.g. miners) whose lending demands are unfulfilled and a great number of cash users are lack of safe and effective financial management services.
As a decentralized financial service protocol, The Force Protocol is not a competitor of other lending platforms, centralized lending APPs and decentralized lending DAPPs in the lending market, but a partner. The Force Protocol can provide order ledger even fund to these lending platforms. Only under this condition, can we facilitate and vitalize the whole ecosystem of the crypto-asset. Based on the underlayer technical architecture of The Force Protocol, the centralized lending projector can conveniently and rapidly build a decentralized application. The Force Protocol not only support lending, depending on the future growth of the decentralized financial service, but also support Open Finance services such as decentralized stablecoins, issuing of the bonds, derivatives exchange, payment and clearing settlement, etc.
Nowadays, all the block-chain applications are faced with crosschain interaction problem. The Force Protocol supports crosschain interaction and plans to realize crosschain interaction via the IBC communication protocol module under the COSMOS project. In the future, we will also pay attention to the crosschain technology under the Polkadot project. Currently, The Force Protocol has an architecture as follows in terms of lending:
Scenario B: Multi-chain cryptoasset pledged stablecoins
Besides the realization of the lending conditions, as the issuing and application of the stablecoins are naturally linked to the lending services. The Force Protocol first created the initiative to realize the pledging and issuing of the stablecoins based on several kinds of multiple blockchain cryptoassets and provided an open-source framework for the stablecoin issuers to allow them to customize the kind of asset, percentage or management mechanism. This platform also helped people to optimize the cross-chain pledged asset portfolio with concept of market competition.
Under such circumstance, the stablecoin providers can choose pledge assets for their DAPPs based on their own risk management capacities and collateral asset preferences. Providers offer decentralized pledging of assets in exchange of stablecoins service for holders of different public blockchain assets according to the contracts which The Force Protocol provides in development architecture, development pledging, risk management and closing,
After market competition, the best DAPP team in asset portfolio, risk control, user experience and governance will win and become one of the main sources of stablecoin in The Force Protocol system, maintaining the stability of their stablecoin.
This mechanism can finally realize Hayek’s economic system of private currency issuance and circulation as proposed in the book “Denationalization of money”, thus creating a global, freely competitive money market, the first time in human history.
(In Professor Hayek’s original text, private banks issue money through credit and are responsible for maintaining the purchasing power of their currency on basic consumer goods. Different issuers occupy their market share by maintaining stability of their currency prices. In stablecoin scenario, it is to maintain a firm mechanism of stablecoin generating through decentralized loan, and maintaining the purchasing power of stablecoin on cryptoassets.)
The core of finance is liquidity. In the traditional financial system, a large proportion of liquidity comes from the pledge of assets, and a large amount of credit and funds support economic growth. What The Force Protocol does is to use credit and stablecoins as an entry point to allow existing on-chain assets and assets that will be on-chain in the future to be used for pledge lending, generate liquidity, and then open up payments and cross-border functions such as liquidation and settlement, and the stablecoins generated on-chain can be reinvested into the real economy through the fiat-currency conversion system, thus opening up the liquidity ecosystem between on-chain and off-chain, and promoting economic development.
Based on the current architecture, The Force Protocol will quick iterate based on the minimal realizable versions and remain in close contact with Open Finance community to unleash more financial functions on the blockchain.
The development cycle of The Force Protocol starts from January, 2019 and is expected to provide development support for multiple financial scenarios in the next three years. Along with the project development, the team has gradually built a complete business cycle including investment, mining and lending since 2018. With the mining machines owners from the Erdos mining farm and Sichuan mining farm with are built by the team, The Force Protocol has built a user pool of crypto lending App and found a value-adding spot for the lending fund. Meanwhile, a cycling loop powered by multiple parties can be formed with the mining revenues generated from privately owned mining farms/pool and the revenues generated from fiat investment in the traditional financial sector. Every link of the cycle is interdependent and could be managed individually or collectively. Therefore, it will become a closed commercial loop, which is continuously profitable. On the one hand, in the beginning stage, it can support the development of The Force Protocol. On the other hand, it is an open growth model that will benefit the growth of financial ecosystem of The Force Protocol.
The Force Protocol aims at the next launching pad in the cryptoassets industry. We hope to find more top-tier partners in the industry to facilitate the growth of the decentralized financial service industry and accelerate the evolution in human history.