[Coinlist] A Deep Dive into Qredo: Radical New Infrastructure for Digital Asset Ownership

A Deep Dive into Qredo: Radical New Infrastructure for Digital Asset Ownership

A Deep Dive into Qredo: Radical New Infrastructure for Digital Asset Ownership

Yesterday, we announced the Qredo Token Sale on CoinList, starting July 8, 17:00 UTC. Qredo unlocks value across the multichain universe by offering decentralized custody, native cross-chain swaps, and cross-platform liquidity access. We sat down with several contributors to the Qredo Network to break down what they are building, its use cases, and recent traction in executing on Qredo’s radical new approach to bring liquidity and capital efficiency to the blockchain economy.

1. To begin, what is Qredo and what problem does it solve?

While Satoshi took the trust out of transactions with Bitcoin, centralized methods of managing private keys reintroduced trust to the crypto market.

Storing vulnerable keys in databases, and shunting them offline in hardware and paper wallets, has led to not only poor billion dollar security breaches, but soloed liquidity and market fragmentation; assets are locked away and can’t be readily deployed in the DeFi ecosystem, with accessibility and granular control sacrificed for the sake of limited security.

Qredo changes all of that.

This radical new blockchain infrastructure eliminates the need for private keys to manage the ownership of digital assets. Instead, a trustless implementation of multi-party computation (MPC) provides a flexible way of signing transactions that meets institutional governance and security needs. This is coupled with an interoperable Layer 2 network that acts as an immutable asset registry, allowing for instant cross chain settlement between previously soloed blockchains and platforms. On top, a Layer 3 decentralized communication network supports encrypted trade negotiations and allows information to be attached to transactions.

2. Can you describe your target customer(s)? What type of projects and use cases are best suited to leverage Qredo infrastructure?

Amidst the explosion of DeFi protocols, institutions have come to realize that storing dynamic decentralized assets within the walled gardens of centralized custodians cuts them off from the innovation of crypto — effectively reducing them to inert assets in hibernation.

We now have a situation where individual investors can freely interact with DeFi from retail wallets, while institutions operating under a larger set of constraints are locked out. They are deprived of the ability to borrow, lend and stake in DeFi, and prevented from quickly executing time-sensitive trades. This forces many asset managers to adopt a passive buy and hold strategy instead of capitalizing on volatility and yield-earning opportunities.

Qredo bridges DeFi with institutional finance, providing asset managers — from corporate treasurers through to specialist crypto hedge funds and private banks — with infrastructure that meets institutional standards.

For example, a corporate treasury team might use Qredo for the internal management of digital assets. They could distribute signing authority between corporate departments and designated custodians to meet organizational requirements, and implement bespoke automated workflows for operational tasks like reconciliation and settling between brokers, exchanges, and other connected counterparties on the network.

3. While institutional participation in DeFi has dramatically scaled up over the past couple years, there are still significant hurdles to overcome in terms of speed, security, and compliance. Can you explain the risks and challenges that traditional institutions face when entering the DeFi space?

DeFi offers yield-starved institutional investors unparalleled opportunities to ‘sweat’ assets by deploying them across different protocols. Yet this can pose critical risks and challenges:

  • Unscalable governance. Digital asset wallet infrastructure is typically designed for individuals. Not institutions, which are unable to allocate signing and access permissions to match corporate governance structures.

Qredo allows organizations to implement bespoke governance; appointing an unlimited number of signers and delegating permissions to fit custom custodial policies.

  • Shallow liquidity. Crypto asset liquidity is siloed between chains and protocols, making it difficult for big players to get in and out of the market without slippage. Qredo acts as interoperable middleware that trustlessly interacts with different chains to scope out the most efficient trading routes across multiple DeFi protocols.
  • Cumbersome asset management. Managing funds between multiple protocols on different chains means juggling different interfaces, paying high gas fees to move funds around, and relying on cumbersome token bridges. This represents a challenging user experience for traders, and makes it difficult to provide a complete record of transactions for accounting and compliance purposes.

Qredo allows institutions to manage assets deployed across different decentralized protocols from a single dashboard. Institutions can monitor balances in real-time to make better business decisions, and instantly export a single audit trail for easy accounting.

4. Why do asset managers want to access cryptocurrencies on Layer 1 blockchains, such as Bitcoin, Ethereum, and Polkadot over a Layer 2 network?

Layer 2 networks can provide much-needed scalability; helping asset managers bypass slow confirmation times, high fees and adversarial mempools that make real-time trading, settlement and clearing challenging.

The fast-finality offered by Qredo Layer 2 enables instant transactions between users, platforms and protocols on the Network, allowing institutions to instantly take advantage of time-sensitive trading opportunities.

5. Competition in the layer 2 space is heating up, with dozens of projects fighting to improve the Ethereum ecosystem. Who are your competitors and what differentiates Qredo from these projects?

As a Layer-2 decentralized custodial protocol designed to act as middleware for capital markets, Qredo is not looking to directly compete with other Layer 1s or Layer 2s. We see ourselves as adding value to all. However, we can be distinguished from existing Layer 2s in several key ways:

  • Custodial functionality. Qredo’s Layer 2 network acts as an immutable asset registry, turning the blockchain itself into a secure vault.
  • Governance. Existing layer 2s give No architectural and technological consideration to governance requirements of capital markets customers. Qredo gives users the ability to appoint multiple connected custodians exercising governance responsibilities, with an immutable audit log detailing what actions have been taken by what actor and what custodians approved these actions in regards to the customer’s digital assets.
  • Cross chain interoperability. Existing Layer 2s are typically focused on one specific chain. Moving funds between these isolated Layer 2s can mean being forced to travel back to the mainland of the original Layer 1, and then making another jump to the final destination via a cumbersome token bridge. As a cross chain Layer 2 network, Qredo acts as interoperable middleware — enabling the seamless trading and atomic swapping of assets between different chains.
  • User-centric tokenomics. Until now, Layer 2 token models have been based on Layer 1 chains that reward validators.  Qredo takes a new approach to tokenomics,  incentivizing all network participants with a multipurpose token model. This provides a sustainable model for generating long-term network value.
  • Immutable audit trails. All actions made on the Qredo Network, including transactions, governance changes and wallet creation, are recorded on the Layer 2 blockchain. This forms an immutable record that can be instantly exported for bookkeeping and compliance purposes.  Sender and recipient identities can be included for easy compliance with the Travel Rule.

6. What have you learned from launching version 1 of the Qredo mainnet? What will be different in version 2?

The version 1 (v1) mainnet launched late October, just as DeFi was starting to mature from its experimentation phase to a global phenomenon.

As institutions continue to embrace DeFi, our focus is on developing an all-encompassing network to foster innovations in the space while significantly reducing the risk and cost of operation.

With mainnet 2.0, we are expecting to open source the Qredo Client (node), and a number of integration libraries, by Autumn 2021. This will enable developers to access the transaction types and transfer functions implemented on the blockchain. We are also developing a one-to-one account wallet implementation for tracking Layer 1 holding addresses. Most importantly, we will be decentralizing the network for users to take full control of it by allowing anybody to set up a validator node.

7. What is the inherent value and use case for Qredo’s native token, QRDO?

The Qredo Network Token (QRDO) fuses the features of utility tokens and governance tokens to create a user-centric model that incentivizes not only validators, but all network participants.

There are four types of network participants, and they are rewarded via a combination of two mechanisms: fee-based compensation and inflation-based compensation.

  • Market Makers that continuously provide quotes for a given digital asset. They are incentivized to provide liquidity through (i) earning QRDO tokens through Inflation-based compensation and (ii) earning additional income in layer 1 assets as an additional reward from Fee-based compensation.
  • Validators that take turns validating, proposing and voting on transactions to be included in the next block. 80% of the Layer-1 fees are converted to QRDO tokens (by market makers) and remitted to the Validators as Fee-based compensation for validation transactions, securing the network and being highly available.
  • Traders that atomically swap digital assets on the network. They pay a fee, which is calculated as a small percentage of the Layer 1 assets being transferred or traded. These fees are rebated up to 100% in QRDO tokens (which must be staked with validators for a minimum period of time).
  • Custody Users that store digital assets on Qredo Network. They are rewarded based on the value of the assets they hold via a per-epoch approach with a semi-variable inflation rate.

Yield-starved institutional investors have begun to experiment with the opportunities offered in DeFi. Much-needed institutional liquidity is on the cusp of entering, and this has the potential to further legitimize the market and help create efficient and more inclusive financial infrastructure for everyone.

We are also standing at the dawn of the multichain future. Multichain support for assets and protocols has become one of the biggest narratives of the past year, as the tribalistic barriers that have boxed the industry in for so long have started to thaw out.  As growth, demand, and utility for these protocols grow, so too will the expected ease of transferring, exchanging, and settling assets across different blockchains. In the coming months, we are expecting the current unwieldy and siloed multichain bridges to give way to seamless and decentralized cross-chain channels.

This new interoperable middleware will break down interoperability and liquidity silos to create another set of platforms competing to accrue value.

9. What is the best way for the community to get involved with Qredo?

Community is integral to any blockchain startup. In our quest to unify the blockchain ecosystem, we want our community to also be an extension of what we’re building – a place for everyone and anybody, a place to learn and grow, a place to maximize your potential. To further align the community with our objectives, we will be launching a year-long ambassador program structured around growing content, presence, and developing dapps on the network  

Our ambassadors will help both new and existing users understand our ecosystem better, identify and connect with potential synergies, organize regional events, participate in hackathons, scale and grow with us.

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