Note: Persistence has pivoted to liquid staking and building DeFi primitives to increase the utility for staked assets. This article is only for archive purposes.(Visit here to read our latest blogs)
Persistence is a Protocol powering Institutional Open Finance.
Persistence was started with the thesis of using Public Blockchain Technology and features of Decentralised & Open Finance (DeFi/OpFi) to solve inefficiencies in cross border payments and business financing. As a byproduct of solving these problems, Persistence aims to enable fundamentally new capital to enter the cryptocurrency industry.
Persistence bridges DeFi and Traditional finance by facilitating borrowing of Crypto Assets (stablecoins) using real-world assets (invoices to begin with) as collateral.
Persistence performs this in a four-step process:
- Tokenization of real-world assets (using Non-Fungible Tokens or NFTs) such as invoices
- Trading of tokenized real-world assets (represented by NFTs) against stablecoins
- Usage of these tokenized real-world assets (NFTs) as collateral to borrow stablecoins (originate loans)
- Packaging of the loans originated into tranches/pools to create fixed income investable products (securitization of debt)
Persistence facilitates seamless exchange of value to increase the speed and efficiency of real-world Trade, Payments and Business financing
Persistence’s two-pronged approach:
- Institutional focus: Asset-Based Lending P2P Trade Finance use case through the Comdex dApp for institutional ‘physical commodity’ traders and trade financiers
- Crypto-native focus: Securitization of Debt (Pooling of debt) and Stablecoin Lending Platform to give exposure to real-world income-generating assets to crypto-native stakeholders
Asset-Based Lending is the business of lending / loaning money to borrowers who put their assets such as invoices, accounts receivables, inventory, property, etc as collateral.
The first use case of Asset-Based Lending in the Persistence ecosystem is Comdex. Comdex is a Decentralized Commodities Trading and Trade financing platform that covers the end-to-end trader journey (essentially matches commodities buyers and sellers of physical commodities, while also providing receivable financing to sellers).
Securitization of Debt (Pooling of debt)
Securitization of debt is a process which allows a primary financier (an asset originator) to merge or pool together multiple steady cash-flow generating assets into one or more asset pools. The returns on these asset pools are generated from the underlying income-generating assets.
In the Persistence ecosystem, the primary financier originates multiple loans (keeping invoices as collateral) for sellers requesting financing on the Comdex platform. These loans are then put into tranches or pools (securitization of debt) based on various factors such as risk, type of primary financier etc. The Persistence dApp — a cryptonative user facing dApp — allows Stablecoin holders / liquidity providers to lend their stablecoins to these liquidity pools to generate yields.
There are three macro conditions that highlight that the need for a solution like Persistence has never been greater:
- Supply of Capital
- Demand for Capital
- Explosive growth of Stablecoins
1. Supply of Capital: Decline in Interest rates
With Central banks of most advanced economies holding zero or negative policy rates, $13 Trillion is held in negative-yielding bonds (as of Q1 2020) — meaning the buyers holding these securities to maturity are guaranteed to make a loss.
According to the Bank of England economist, Paul Schmelzing, who recently conducted the most extensive analysis of real interest rates spanning eight centuries from 1311 to 2018, the decline in interest rates in recent times is part of a long term trend spanning centuries, asset classes, political systems and monetary regimes.
The trend confirms an increasing amount of capital finding it progressively difficult to produce yield.
2. Demand for Capital: Financing gap
Large corporates have no trouble getting access to financing from financial institutions. MSMEs, on the other hand, struggle to obtain loans. Stringent capital adequacy requirements implemented on financial institutions post the Global Financial Crisis has severely impacted banks’ ability and willingness to lend to MSMEs.
This has resulted in a cumulative Business and Trade Finance gap of 1.5 Trillion with 45% of this gap being in APAC.
3. Explosive growth of Stablecoins
With the Stablecoin market cap surpassing $10 Billion in market capitalization and growing rapidly, there will be an ever increasing supply of borderless and instantly settled capital looking for new ways to generate yield.
Persistence facilitates more efficient global capital allocation by allowing businesses and traders to draw loans against receivables in fundamentally new ways to meet their financing needs. On the other hand, it allows investors in low-interest jurisdictions to generate yield through a fundamentally new asset class in the form of real-world income-generating assets.
At Persistence, we believe that if the Cryptocurrency and Blockchain industry has to scale to the trillions of dollars and move from the ‘speculative’ phase to a ‘value creation’ phase, it has to solve ‘real-world’ problems for someone in the world.
We are beyond excited to be on this journey of using this technology to solve problems, create access, create efficiencies — and do our bit to help this industry reach its full potential. 🚀
We are always on the lookout for connecting with individuals or organizations who wish to take advantage of the opportunities present in the Blockchain space and want to learn more about Persistence. If you wish to get in touch, please do not hesitate to reach out to us