At first glance, serial entrepreneur Mike Cagney's recently announced cryptocurrency exchange Figure Market looks like another post-FTX trading and custody venture aimed at institutional investors. But when you dig deeper, a variety of value propositions emerge, from cost-saving practicalities to vision-defying innovations.
Key components include an alternative trading system (ATS), a broker-dealer license, the ability to cross-collateralize crypto and real-world assets, and lending and borrowing using Figure Technologies' balance sheet as a catalyst to get things moving. Masu. What supports all of this is multiparty calculation (MPC) wallet, a largely decentralized order book, and support from market maker Jump Trading.
There is no doubt that the billions of dollars of assets stranded on FTX have prompted a rethink of crypto exchanges.In the case of Figure Market, it became necessary to build an exchange derived from a sister company. figure technologyHistory of tokenizing non-crypto assets (over $30 billion since 2018) using the Cosmos-based Provenance Blockchain built by the company.
By Cagney's own admission, experimental efforts such as creating an on-chain market for private company stocks and trading figure stocks on the ATS failed to gain traction. Similarly, onboarding a heavy hitter like Apollo to trade interests in on-chain funds also didn't work.
Cagney remains bitter about the learning curve. “These are two very popular business models that people are touting about blockchain right now. We've done both, and I can tell you that neither one works,” he said in an interview with CoinDesk. He spoke at “So we decided to take a step back and look at the market structure. What struck me was that even after what happened there, Binance and Coinbase are still functioning the same way as FTX. acts as custodian and settlement agent.”
Based on Jump Crypto, using MPC was the right direction. silo The offering is Security is a complete benefit This is similar to self-management and effectively realizes Cagney's concept of a “decentralized exchange.”
Cagney's version differs from DEX in the following ways: decentralized finance (DeFi), an anonymous party automatic market maker (AMM). Instead, it features a limit order book, but is as close to on-chain as a large-scale deployment is technically possible.
“We can't scale this to a level where we can compete with Binance or Coinbase,” he says. “So ultimately you need to bring some order-matching structure off-chain that writes back to the chain every 5 seconds. For 5 seconds, you're using a concentrated order structure, but with no significant We have not yet obtained collateral.”
Either way, Cagney's view is that AMM is bad for consumers. “Everyone brags about AMM, but the reality is that AMM is constantly being abused by market makers who sandwich attack retail customers who trade on AMM. The real panacea is getting the blockchain calculations right. It's time. But until then, we need to perform episodic off-chain matching to meet the required throughput. That's not disingenuous to the theory of decentralization, but at least is in line with it.”
Market makers like Jump have found great value in both the decentralization and cross-collateralization potential of Figure Markets. But they flagged another issue, one around lending liquidity and the ability to access capital from a lending and borrowing perspective, Cagney said. “Look at the prime brokers of cryptocurrencies. In an industry that can easily burn through billions of dollars a day, they actually only have somewhere in the hundreds of millions of dollars to lend.”
To address this, Mr. Cagney appropriated about $100 million from Figure's balance sheet to spin the financing flywheel.
“What's really interesting is how we can democratize prime finance, so we don't need an introducing broker,” Cagney said. “Just connect your wallet to an exchange and trade. No need for Robinhood, no need for Schwab, no need for TD. [Ameritrade], and the entire Prime system. What we end up with is a complete restructuring of the way financial markets work in a way that is very disruptive but very creative for everyone in the ecosystem. ”
