The Force Protocol: Develop a global distributed crypto-asset financial services market
On April 14th 2019, David Lei, co-founder of The Force Protocol project, delivered a speech entitled “Develop a global distributed crypto-asset financial service market” in Ho Chi Minh City, Vietnam.
The speech sparked a high level of attention and heated discussion among Vietnam local community audiences. Following is the full text of the speech, we present the whole text here for all community members to know our project better.
[Slide 1: Main title]
Hello everyone, I’m David from The Force Protocol team, also the cofounder and blockchain architect of this project.
At first, I want to thank you for coming to this event, I find people in Vietnam have very high enthusiasm on blockchain tech and crypto, that’s very exciting for us who are promoting progress on this industry.
As we all know, in the past years, we have enjoyed more convenient financial services by the fin-tech improvement. Take my homeland China for example, people nowadays can only take their cell phone along with themselves at weekend, they can make payments through Alipay and Wechat pay at anytime, nearly all restaurants, shops, super markets support those fin-tech applications, none of these convenience exists ten years ago.
However, these improvements are making change only on the surface of whole finance system, there are still a lot of barriers in current system, such as restricted real-estate information sharing, strict microloan censorship, international currency barriers and a lot of problems make people couldn’t have real finance freedom. Also government controlled currency policy is leading us to a huge global risk of finance chaos.
That’s the reason of open finance’s birth, hope to bring revolution to current finance system. Today, I will share with you the progress on open finance, and what our project is doing for improvement on this area.
[Slide 2: Part 1]
At first part, before we talk about open finance, we need to understand how the currency issuing and recycling mechanism is working. Then we will see it clearly what great progress does open finance bring to us.
[Slide 3: The value transmission mechanisms in the current financial services system]
This slide show us the value transmission mechanisms in the current financial services system.
In the analog world, traditional banking system is mainly made of three parts.
First, central bank controls macro economic monetary policy such as currency policy within a nation or ecosystem, by finance tools such as open market operation, commercial banks reserve requirement ratio and basic interest rate, central bank controls inflation speed to maintain sustainable growth of economy. However, because of human’s arrogance and myopia, central bank’s currency policy often fails.
Next, commercial bank absorbs saving from citizens and enterprises, then creates credit through loan, credit card payment and other tools, by credit creation, currency in cycling grows double times, even more.
Third, investment banks create new credit and currency through tools such as stocks, bonds and other derivatives, along with these tools are high efficiency and high level economic activities, however, the higher finance tools brings higher risks, such as financial crisis in the year 2008 is best evidence of traditional banking system’s failure.
Last ten years, in the corner which traditional finance world does noticed, a new revolutionary force is growing, that’s cryptoassets such as Bitcoin and Ethereum, also the open finance ecosystem. You must want to know, what is open finance indeed?
[Slide 4: The value transmission mechanism in Open Finance ecosystems]
Open finance is a totally new world which traditional financial giants have no power, in this new world, value transforms from off-chain to on-chain, this made currency denationalized and free from physical nation boundaries. Using the basic instruction of open finance, we could design a whole new currency circulation system.
In open finance, the first step is non-sovereign money creation through process such as mining, as we can see, algorism become central bank in this new ecosystem, and free from people’s executive will. Along with the mining is electrical energy transform into crypto value, this means cryptocurrency like Bitcoin and Ethereum has its own value and is measurable.
The second step, fiat currency, US dollar of Chinese Yuan converse to cryptocurrency such as Bitcoin, Ethereum and Stablecoins, cryptoexchanges like Coinbase and Binance plays the role of relayer in process of conversion between analog value and crypto value. We can find that crypto exchanges keep the role of commercial banks, when the market is in bullish, people tend to converse their fiat currency into crypto, when the market is in bear, lots of people converse crypto into stablecoins even fiat.
Then, cryptocurrency could do more than transaction on many public blockchains, that is the open finance system. Different public chain has their different financial protocols and DAPPs, such as Lighting Network of Bitcoin, and #DeFi on Ethereum.
[Slide 5: Part 2 The value transmission mechanism in Open Finance ecosystems]
In part two, I will show you Current Open Decentralized Financial Services on Ethereum, and what is its beneficiary.
[Slide 6: DeFi ecosystem / economy on Ethereum]
The DeFi concept is first introduced by Coinbase exchange and its allies. This slide is a glance of open finance ecosystem on Ethereum by the end of year 2018, let’s take a review of what progress is achieved in open finance.
The first step is fiat to crypto exchange in crypto exchanges.
In the second step, everyone can use their smart phone to access the open finance resources through total free applications such imToken app or Metamask in web explorer. By the support of those public blockchain interface, people can easily use decentralized financial applications built on public blockchain.
As you all see, there are already DAPPs of financial services on Exchange, Stablecoins, Lending, Asset management, Derivatives, Tokenization and other types. Those applications are all very famous in open finance ecosystem, if you have interest in this area, you can try to use one or more of them after this event.
[Slide 7: A hypothetical example of open finance]
Here, you can see a hypothetical example of open finance in lending.
Under the scenario of traditional bank, saver get very low interest rate like 1 percent from bank, however, bank get usually more than 7% interest from borrower, this business makes bank get a net income about 6%, bank is finally winner.
After we create fin-tech, people can get loan easier from fin-tech companies, under this scenario, saver still get lowest income, bank can also keep at least 4% income, fin-tech company get about 3% income, but in China, fin-tech companies found it’s easy to raise their loan interest rate to usually more than 14% when the lend money to high risk borrower such as low income people. This business model becomes more and more evil, many people are hurt by those so called “fin-tech” companies.
Now we have open finance, what will things change under this new ecosystem? From this example, we can find that because very low maintaining cost, interest rate ratio of DAPPs acting underwriter role could be very low, for example, 1%. Depositor could finally get more interest income, here is 4%. Borrower can also get lower interest cost, here is 5%.
[Slide 8: The ultimate beneficiary of open finance may be consumers and various financial service providers]
After last slide’s example, we can get a conclusion, the ultimate beneficiary of open finance may be consumers and various financial service providers.
Because of public blockchain’s open and free to use character, anyone can use an internet terminal such as mobile phone to access the open finance ecosystem. We can achieve real inclusive finance the first time in human history.
To traditional banks, money from depositors are actually used by banks for various investments, the risk of targets is either high or low, for depositors, no matter their money are invested in a high-risk target or a low-risk target, the interest income earned is the same. This is an unfair, inefficient way of using funds.
In the future, value competition will become intensify. Open financial services based on blockchain technology can guarantee competition under the premise of fairness. Due to its inherent openness and upgrade capability, investors and customers can obtain better services and create innovation in a world where capital competition is increasing.
[Slide 9: Part 3 Exploring the new edge of open finance ecosystem]
After introduction of open finance, I think all of you understand the progress and beneficiary of it.
Here I have a question, do you think there is anything we need to do about improving the whole system?
Some audience seems don’t know the reason why we need to reform the whole open finance system, here is another question, how many of you used before mentioned DAPPs?
I see some friends raised their hands, OK, if you used these DAPPs, you can find that their user experience is not friendly, sometimes you need even whole day to wait for smart contract execute next step.
Besides the low performance of current financial DAPPs, the other problem is open finance DAPPs are nearly all on Ethereum, there are still a large amount of value storage on different public blockchains, how to active those value, or even make value cycling between different public blockchains? Those needs are exactly what our project what to solve, in this part, I will show you some work we done and our idea about exploring the new edge of open finance ecosystem.
[Slide 10: Problems we solve]
What does The Force Protocol do, is also the question of what problem do we solve, on our official website, we introduce five area of problem we solve. There are:
1. High technical threshold for developers due to complicated underlayer technology.
2. Cross-chain transaction of cryptoassets is hard to realized on different blockchains.
3. Financial contracts are difficult to construct due to complex products rules.
4. Lack of reliable oracles to achieve on-chain and off-chain data communication.
5. Information asymmetry of centralized loan platforms, operators are apt to do evil.
The Force Protocol is developed under the concept of financial scenario needs. In following slides, I will introduce two scenario we current focus on.
[Slide 11: Scenario A: Loan service underlayer architecture]
The first scenario we focus is loan service.
As you can see in this under-layer architecture, we create an open platform for DAPPs developers, by the SDK toolkits and API of our platform, developer can easily create their own loan service DAPP, all the DAPP connect with our network has same protocol layer functions support, such as asset management, oracles, data models and so on.
All these DAPPs share a global loan order book on our blockchain platform, DAPPs runners only need to focus on their market operation, customer experience optimize and don’t need to worry about technical issues.
With our cross-chain technology, even DAPPs from different blockchains such as Ethereum and EOS and communication and exchange value with each other. This system will create a larger global crypto-loan market than today’s open finance ecosystem.
[Slide 12: Scenario B: Stablecoins under-layer architecture]
The second and exciting scenario is decentralized stablecoins.
Today we have three kinds of stablecoins, two kinds of them are running well, one kind is fiat backed stablecoin such as PAX, USDC and TUSD, the other kind is decentralized crypto-assets backed stablecoin such as MakerDAO.
The Force Protocol support all of these two kinds of stablecoin, to the second kind, asset back coin, we have an exciting cross-chain solution which you can see in this slide.
Also, the same as loan scenario, stablecoin runner only need to focus on their own product’s optimize, no need to care about under-layer blockchain technical questions.
Beyond current simple, one chain backed stablecoin, The Force Protocol choose to develop a platform for all runner of stablecoin, by market competition, some interest thing will happen.
[Slide 13: Revolutionary stablecoin coincide with philosophy of Friedrich August von Hayek]
Here is a hypocetical example of stablecoins on The Force Protocol platform, by the support of cross-chain tech, different stablecoin runner tend to choose different crypto-asset pledge portfolio, interest rate, risk control and governance mechanism.
In the year of 1980s, professor Hayek get a conclusion on private currency issuing, that is private currency will have more stability than nation issued currency under market competition. The same as professor’s wisdom, using The Force Protocol, people can get a global international stablecoin market. At last, optimal cross-chain assets portfolio will be chosen by market competition.
[Slide 14]
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.
[Slide 15: Technical feature of The Force Protocol]
This slide shows technical feature of The Force Protocol, we make a smart contract platform for DAPP developers, which makes DAPP develop easier and freely customized.
In our protocol layer, we offer automatic broker function which makes transaction efficient and intelligent. All DAPPs connect to our network will have the same global shared trading book, which offers free liquidation and deep trading volume.
To speed us transaction and reduce blockchain resource usage, we have an offline broker and online transaction mechanism, which will make crypto business lower cost, safe and reliable.
To services which have compliance needs, we open the function components towards sandbox supervision.
At last, I just mentioned that we have a cross-chain tech backed stablecoin issuing framework, which help people to engage in a global decentralized currency market.
[Slide 16: Relationship between The Force Protocol and current open finance DAPPs]
Here we can get a conclusion, the relationship between The Force Protocol and current open finance DAPPs, public blockchains is not competitor, but friend and partner.
With our technique and open source platform, DAPPs runners can easily build their own business, don’t need to spend large amount of investment on technical facilities.
Also by more and more DAPPs connect in, the global decentralized financial service market will become stronger and more important, open finance ecosystem will have a totally revolution.
[Slide 17: The Force Protocol token FOR]
We created our platform token FOR, the total supply of FOR token is one billion, it is an ERC20 format token, people can easily use our token in Ethereum based wallets.
[Slide 18: FOR Function]
The function of our FOR token is showed here, basically, FOR token has several functions, such as transaction fee deduction, when people want to increase the LTV of their loan, they need to hold specific amount FOR token.
For supernodes which engaged in our ecosystem, they need to pledge a large amount of FOR token for membership.
FOR token can also be used as collateral for loan or stablecoin. We will also design more community governance functions of FOR token with our community members together.
[Slide 19: FOR Allocation Proportion]
The allocation proportion of FOR token is showed here.
30% of total token will be allocated to community ecological construction.
25% of total token will be hold by The Force Protocol Foundation in Singapore, the foundation will use token for long term development of our project.
30% of total token is for strategic investors and community donations.
15% of total token will be reserved by the founding team, and will be locked until 12 months after token listing, then 30% of team token will be unlocked the first time, after another 12 months, 30% of team token will be unlocked, the last 40% token of total team holdings will be unlocked 36 months after listing.
[Slide 20: Road map]
This slide showed our road map, there are one thing for your information, based on cross-chain tech’s development, our project may delay or fasten the cross-chain transaction function and public chain’s development.
[Slide 21: Institutional investors]
Based on our vision and technical background, also be bullish about our future market scale, many token fund or professional investment team have invested in our project, such as today’s host BN capital. We also welcome more qualified investor to strategically invested in our group and reshape the future of open finance together with us.
[Slide 22: Strategical partners]
Here are our strategical partners, we welcome media operators, community leaders and financial services providers to become our partners, building a better open finance ecosystem together.
Thank you very much for your attention, we welcome you to join our community groups and follow our latest progress, help this project to grow better.
Official Website: https://www.theforceprotocol.com/
Project Twitter: https://twitter.com/Force_Protocol
Global Telegram Community: https://t.me/theforceprotocol666
