OpenDeFi is a platform that encourages the tokenization of real-world assets such as gold, stocks, commodities, exchange-traded funds (ETFs), silver, and many more.
Apart from keeping their secrets tightly guarded, the law requires traditional finance companies to conduct anti-money laundering (AML) and know your customer (KYC) procedures. Coupled with the price volatility of cryptocurrency prices, these have caused conventional firms to miss out on the advantages brought by the decentralized finance (DeFi) train.
Fortunately, developers are creating blockchain-based platforms with the capability to handle KYC, AML, price slippage, as well as offer split-second transaction times and other functionalities in a bid to make these platforms at home with DeFi and the DLT space at large. An excellent example of such platforms is Open Finance by OroPocket. It brings real-world assets to the blockchain world, thus, increasing the confidence of conservative investors and firms to cross over to the other side.
Here, we put Open Finance under a microscope and interrogate its every aspect.
Table of Contents
Who’s Behind the Project
The platform is developed in conjunction with key platforms like Matic, Razorpay, Inblox, Conquest, Pioneer, and Cashfree.
What is Open Finance (OpFi)?
The coming together of the above companies brings to life a platform that can accommodate traditional investors, blockchain developers, and digital asset users. Additionally, it provides a bridge where other decentralized platforms can exchange or share virtual assets.
Notably, it’s major perk is that it removes price volatility from blockchain-based wealth and increases their liquidity. Consequently, deep-pocketed investors such as institutions can trustingly redirect funds to cryptocurrencies and other digital valuables. OpFi achieves this by powering what it calls OpenDeFi.
OpenDeFi encourages, among other things, the tokenization of real-world assets such as gold, stocks, commodities, exchange-traded funds (ETFs), silver, and many more. In addition, the platform is being primed to support synthetics and derivatives as well.
Interestingly, the assets are insured and put under a custodian to increase transparency and provide easy access at all times. To achieve its goal, OpFi is divided into key layers and functionalities.
Critical Parts of OpenDeFi
OroPocket
Think of OroPocket as a bank that converts your deposited funds into assets. To spend the funds, OroPocket provides a debit card. In addition, it enables users to interact with instant loans, earn interest on investments, and send them instantly across the globe to family and friends.
Assets usable with OroPocket include EFTs, cryptocurrencies, energy and oil, wines and whisky, real estate, and precious metals. Note that this aspect of Open Finance was built to hedge against the inflation of government-issued currencies, the lack of transparency from conventional financial institutions, as well as to increase access to funds and bank the over 3 billion unbanked individuals spread across the world. Furthermore, it has an efficient interest rate and saves users from the monkey-business that is unfortunately conducted by banks with user funds today.
Architecture
OpenDeFi’s architecture has notable functionalities. For example, it fractionalizes physical property, enables instant trading and cheap loans, and puts a yield on assets.
- Dividing physical assets into manageable chunks – In the current setting, decentralized platforms allow exposure to the price of real-world valuables instead of the property itself. Unfortunately, without a strong link to the physical property, the trader is exposed to a multitude of risks such as collateral, counterparty, and liquidity risk.
To solve this problem, Open Finance tokenizes physical holdings, opening the door to fractionalization. Furthermore, it removes control from a central authority and bestows it upon a decentralized group of investors.
Apart from allowing direct and fractionalized exposure to physical possessions, tokenization enables real-world assets to be easily moved and audited every 24 hours.
- Instant trading – You don’t need an exchange. Open Finance facilitates the decentralized exchange of physical goods without worrying about price fluctuations. To be able to track an asset’s movement throughout the ecosystem, each virtual property is handled by a unique smart contract. Part of the smart contract’s function is to handle USD-pegged tokens deposited by investors.
The contract then sends an equivalent share of the tokenized worldly possessions. In addition, the contract has a reverse gear enabling investors to send their virtual property and receive a stablecoin-equivalent, such as Tether (USDT), in return. However, there must be a price reference. Therefore, the network uses a decentralized price oracle. Instant trading opens the platform for developers to build insurance, flash loans, among other applications.
- Instant low-cost loans – What if we remove credit scores when filing collateral? Well, it would actually ease the process of getting loans. Open Finance does just that. A user’s asset holding will be used as collateral, and no credit checks are required.
That’s instant. The loans are disbursed in stablecoins and last for a minimum of seven days. Note that the higher the loan amount, the lower the interest rate and vice versa.
- Interest-based assets – OpenDeFi allows users to earn interest on assets. Consequently, more people interact with the network. Yield farming enables users to gain the platform’s native token, ORO.
ORO (Open Finance’s Native Currency)
ORO is the protocol’s governance token. Additionally, it forms the center of rewards and the platform’s reserve system. Staking ORO gives users a right into the platform’s inflationary rewards.
ORO follows Ethereum’s ERC20 token standards and has an initial supply of 100M tokens. The tokens are divided among token sales (30 percent), staking rewards (20 percent), and reserves (20 percent). Others include partnerships, advisors, and marketing.
When invoked as a governance token, ORO token holders can influence critical decisions on the network. Interestingly, they can decide whose part of the team, major platform upgrades, and changes to system parameters. Note that the network’s governance module’s inspired by COMP, a popular DeFi protocol.
Yield Farming on OpenDeFi
Open Finance supports yield farming through real-world assets. Notably, earned yields are distributed in ORO tokens daily. To enhance transparency during yield calculation, the protocol considers the availability of asset-based tokens and the demand.
Lower liquidity means more yields to attract stakers while high liquidity lowers the yields to encourage users to diversify their holding into things like hedging.
Whose Open Finance for?
Good question. The platform is designed to onboard everyone. For example:
- Institutional investors benefit from on-chain AML and KYC procedures, high liquidity, global access, and no price volatility.
- The banking sector can reach the unbanked.
- Open Finance allows inter-chain sharing of digital assets. This solves a situation whereby users avoid a distributed system due to a lack of native tokens and developers sidelining a platform thanks to low user volumes.
Key Open Finance Partnerships with DeFi Networks
OpenDeFi has partnered with several notable DeFi systems to enhance its usability across the ecosystem. For instance, it partnered with Unilend Finance, a blockchain-based platform focusing on spot trading, lending, and money markets. Also, it has collaborated with TDeFi, an accelerator for DeFi startups.
To provide accurate and real-time price feeds, Open Finance tapped into Razor Network, a respected oracle platform focusing on DeFi systems. For security purposes, OpenDeFi turned to Shyft Network, for its known DeFi-focused security offering.
Conclusion
From institutional investors to cross-chain asset sharing, to the banking corridors, Open Finance brings a unique perspective to the decentralized world. By incorporating yield farming, the platform allows DeFi enthusiasts to explore extra rewards for providing liquidity.
On the other hand, a native token gives its holders a right into the platform’s decision-making process. Consequently, the network only provides community-driven upgrades and changes.
