Convergence Finance is a decentralized exchange for tokenized real-world assets.
While the global real estate industry has historically been an attractive market, the problem with the existing blockchain projects in targetting the industry still dampens its growth and adoption. Convergence Finance aims to tackle the issues with the current market landscape with advanced solutions powered by smart contracts and other technologies.
Convergence Finance promises a highly-liquid and decentralized exchange for tokenized securities. It is also designed to bridge the exchange of any utility tokens and security tokens through a meticulous infrastructure that facilitates the seamless swap of these tokens.
Convergence Finance was created in order to address the problem with the current tokenization market and security token landscape. These involve issues such as the lack of scalability of today’s tokenized security market, including a high barrier to entry for potential issuers.
The status quo for investors isn’t on the good side either. Most exchanges that list security tokens suffer from a lack of liquidity despite the growing volume of interested issuers. In addressing these concerns, Convergence Finance found that the best platform is decentralized finance (DeFi).
The creation of Convergence Finance banks on advanced DeFi technology to achieve optimal liquidity and accessible security token issuance. Through the protocol, any user can easily gain exposure to some of the biggest real world projects that can be tokenized which they can trade in its built-in marketplace anytime they wish to.
What is Convergence Finance?
Convergence Finance is a decentralized exchange for tokenized real-world assets. Through the help of smart contracts, the protocol is capable of creating blockchain representations of several kinds of assets so that they can be traded freely on different, supported marketplaces.
Convergence introduced the concept of Wrapped Security Tokens (WST). These digital assets can be fractionalized and designed to support the trade of tokenized securities. This is made possible by their proprietary token wrapping module.
Convergence, on top of its token wrapping module, also implements an Automated Market Making (AMM) model, liquidity pools, and a decentralized autonomous organization (ConvergenceDAO), to support a fully-decentralized WST and utility token exchange.
Wrapped Security Tokens
WSTs are the backbone of the protocol. These are the tokenized representations of real-world assets so they can be freely traded and swapped on a blockchain. An additional feature of WSTs is that they can be fractionalized, something that all digital assets espouse. The purpose of fractionalization is to ease the barrier to entry for interested investors, allowing them to hold only a portion of a WST according to the exposure they are willing to absorb. Anyone can launch their own WST if they wish to monetize a portion of their projects through the blockchain.
Convergence AMM Infrastructure
Convergence AMM allows the protocol to maintain a decentralized, peer-to-peer exchange of WSTs. Without the need for order books, the AMM infrastructure automatically matches buy and sell orders without third-party interference.
In a slightly more technical perspective, what the AMM model does first is it aggregates existing liquidity from multiple sources connected with the exchange in order to provide platform traders with the best offers for their WSTs.
The deployment of the protocol on Ethereum allows it to utilize smart contracts and Ethereum Virtual Machines (EVM). This is also meant to help bridge the platform with other compatible blockchains, such as Binance Smart Chain and Moonbeam, among others.
Convergence features a liquidity pool to further support real-time trades on the platform. In liquidity pools, users stake their assets and earn potential rewards in doing so. This can be performed by locking a portion of your token in a liquidity pool for a specified period of time.
Additionally, users can create their own pools if they wish to. These same pools can be used to launch initial WST offerings in the market where users can make investments. It also benefits asset owners because this makes it easy for them to start their crowdfunding plans through the protocol.
But the biggest benefit brought to the protocol by Convergence pools is that they make 24/7 trades possible on the exchange without consuming so much time for traders or asset owners.
Since the platform is designed to be fully-decentralized, protocol governance falls onto the hands of its utility token holders. Those who own the platform’s native tokens can participate in the voting for different system additions, upgrades, or revision. There are also several other functions that can be voted upon by its native token holders.
CONV is the platform’s native, utility token. It can be used as a medium of exchange, payment for transaction fees, and to gain voting rights in the protocol’s governance mechanism. Additionally, CONV is the token used to distribute rewards to the network’s liquidity providers.
ConvergenceDAO is powered by the CONV token. Holders of CONV are given the privilege of participating in protocol decisions concerning the inclusion of new assets, listing on exchanges, and maintenance of liquidity thresholds, among others.
In addition to these use cases, CONV holders are given exclusive participation access to newly-launched WST offerings and pre-sale events, should there be any.
Convergence is a relatively new project in the cryptocurrency space. While it claims to be the first interchangeable assets protocol in the market, there is still a lot of work to be done in order to establish the success for its proof of concept. Fortunately, the protocol has already laid out the essentials for a highly-liquid security token marketplace. Its fundamentals seem solid.
Through the help of its implemented AMM model and access to liquidity pools, we can expect that investors can be enticed in joining the network. These solutions go above and beyond the problem with centralized exchanges providing tokenization services for real estate assets.
But beyond these solutions, the employment of a DAO is likely to encourage its own community members to remain active in maintaining the protocol. The outlook for the project seems positive and it can be reflected by the amount of interest it got when it launched its first, successful strategic funding round.