The Decentralized Finance space is full of exciting projects and innovative teams creating an ecosystem that solves systemic problems in the traditional financial system. Though Decentralized Finance is a term that describes a many diverse projects, one of the biggest challenges that most teams in the field face is interoperability and compliance with ever-changing regulations.
The team behind the Standard Tokenization Protocol has created a platform addressing some of the challenges faced when users in the DeFi space create new tokens. The protocol provides an open-source standard for defining and issuing tokenized assets. Assets issued on STP use on-chain validators to verify their compliance with necessary regulations and specified requirements.
This means that token issuers will be able to tokenize any asset they own in a legally compliant way. Thus far, one of the biggest hindrances to tokenizing assets and making them available for trading worldwide is the constantly changing regulatory landscape. When issuing a token on the Standard Tokenization Protocol, regulation is baked in on the smart contract level. This allows for the automation of compliance.
STP has a validator committee consisting of individuals elected by token holders. This committee is overseeing compliance on-chain and ensuring that the functionality of the protocol remains intact. Instead of overseeing all token trades manually, tokens issued on STP will have real-time verification of cap tables, come with clear legal guidance, reject any non-compliant trades. The latter is important for any token-issuer looking to be active across country borders.
At this time, there is no consistent regulatory framework that spans across country borders so creating a token that automatically rejects trades in prohibited regions is a game changer. These types of initiatives will allow crypto companies to move from a reactive compliance position to taking proactive measures to ensure they remain in line with the law, regardless of their physical location.
The STP network is also working to bring programmability to the fore in the DeFi space. Using STP’s tools to issue a token, token transfers can be pre-programmed, reducing work hours on the backend. The team behind the protocol is also developing hybrid tokens that have the ability to convert between debt and equity-like features depending on pre-defined parameters and their performance.
With programmed compliance, tokenized assets can be a catalyst for worldwide on-chain crowdfunding. Investors can easily participate in crowdfunding on STP with the peace of mind of knowing that all their transactions are in line with financial regulations and can be fully trusted.
While in traditional financial transactions both parties have to involve an intermediary to broker transactions, STP empowers individuals to execute peer-to-peer transfers without any third-party involvement. The team even highlights the disintermediate transfer of assets as one of their core features in the whitepaper.
All in all, the innovative tokenization protocol is aiming to strengthen financial products and facilitate the creation of new financial products. One such product are synthetic assets.
Synthetic assets have entered DeFi as a new way to benefit from the performance of an underlying asset. And while Synthetix has captured a lot of attention, many traders aren’t aware that the creation of a new Synth — as synthetic assets are called on Synthetix — requires putting up a high amount in collateral. Currently, anyone looking to create a synth on Synthetix will have to put 75 times the amount they want to create up as collateral. When a trader wants to create a Synth out of a Bitcoin position worth $1000, they’ll have to deposit $75,000 as collateral. This makes it nearly unusable for a big majority of crypto-traders.
STP makes the creation of synthetics more achievable as anyone looking to tokenized a position will have to lock up around 200% in collateral, reducing the amount in the previous example to $2000. This ratio is similar to the ratio we see across many DeFi lending protocols.
Another benefit of STP is that it’s built on Polkadot’s moonbeam parity chain. This technology enables full smart contract functionality with Ethereum Virtual Machine implementation and a web3 compatible API. For users of the platform that means that they can benefit from cheaper and faster transactions than on Ethereum and create multichain indexes as bridges connect STP and the EThereum network.
Any assets on ST can easily be used across a variety of DeFi platforms including Dexs and Liquidity pools.
The token of STP (STPT) can be used to generate synthesized asset pools. It’s also given to liquidity providers in addition to a proportion of the trading fees. Token holders will have a right to vote on governance and to change key parameters including adjusting the collateralization ratio functions, changing the collateralization ratio for creating new synthetic assets, or on the pricing curve function used for the Automated Market Making algorithm.
STPT is now trading on Bitcoin.com Exchange with BTC pair.