Converge: High-performance, compliant parallel DeFi settlement layer | Super early project attention

Author: 0xLayman, ChainCatcher

Edited by: TB, ChainCatcher

The total locked position (TVL) in the DeFi field is about US$100 billion, while the fixed income market size reaches US$190 trillion. It can be seen that although the DeFi market is already very large, it is just a drop in the ocean and full of potential compared to the traditional financial market. Therefore, institutional investors often have great interest in entering this market, but the market lacks the infrastructure that meets compliance requirements to help them invest safely and easily.

According to official information, Converge was created to solve the above pain points.

Want to make a settlement layer that integrates TradFi and DeFi?

On Tokenize NYC on March 18, Ethena Labs and Securities revealed their plans to launch Converge, a Ethereum-compatible blockchain designed to integrate traditional finance (TradFi) and decentralized finance (DeFi). Even though Converge has only launched an official website seeking development cooperation, there is no white paper, and even only two official Twitter posts, Converge has attracted widespread attention from the market thanks to the popularity of the cooperation between Ethena and Securities.

As a collaboration between crypto-native protocols and traditional financial license holders, Converge may have the core resources and technological advantages of Ethena and Security, with its core philosophy being to combine stablecoins with compliant real-world assets (RWAs) to provide the right way for institutional funds to enter the crypto market.

As a result, Ethena, a DeFi protocol with a market capitalization of nearly $6 billion, plans to migrate existing eco-business to Converge, making it the core DeFi infrastructure for Ethena. Securities has created nearly US$2 billion in RWA assets on multiple blockchains (such as BlackRock's BUIDL, Apollo, KKR, etc.), and will also issue existing and future tokenized assets on Converge in the future, while promoting interoperability between multiple protocols.

Unlike the existing DeFi ecosystem, Converge adopts the model of paying Gas fees by stablecoins USDe and USDtb to ensure the stability of transaction costs, and tries to dispel some institutional investors' concerns that they are reluctant to adopt a volatile fee structure system. In addition, Ethena's native governance token ENA will be used as a staking asset (sENA) for Converge, ensuring the security of the network through a set of permission validators composed of traditional financial institutions and centralized exchanges.

DeFi ecosystem

Converge builds a three-layer structure around Ethena native USDe, USDtb supported by BlackRock BUIDL Fund , and iUSDe designed specifically for asset management institutions to meet different user needs:

1. Open DeFi Eco-layer : No permission required, supports free transactions and asset interactions for all users.
2. Licensing Application Layer : Created for institutional users that meet KYC/KYB requirements to ensure compliance and security.
3. Tokenized securities financial product layer : Deploy a complete tokenized securities issuance and management system with Securitize, covering a variety of asset categories such as stocks, bonds, real estate, etc., and actively explore new application scenarios such as on-chain stock trading.

In terms of performance, Converge will be compatible with Ethereum virtual machines (EVMs), allowing it to run Ethereum-based smart contracts, dApps, and tools without modification, and its performance will be consistent with industry-leading blockchains.

Partners

Currently, Converge has attracted support from multiple DeFi projects and plans to launch a dedicated market for tokenized assets and iUSDe with Aave Labs, a monetary market that supports Ethena and Securitize assets, a partnership with Maple Finance to build on-chain earnings and credit products, a partnership with EtherealDEX to provide high-performance derivatives and spot trading, and a partnership with Pendle to focus on interest rate speculation on institutional assets.

In addition, institutional custodians such as Anchorage, Copper, Fireblocks, Komainu and Zodia will provide them with asset supervision and compliance support. At the technical level, Converge will achieve cross-chain integration through the LayerZero and Wormhole protocols, and provide real-time data support with RedStone and Python oracles.

Opportunities and Challenges

The compliance solutions provided by Converge are expected to attract more traditional institutional investors to the DeFi market, thereby enhancing market liquidity, consolidating the market foundation, and promoting the appreciation of related crypto assets.

However, the differences in compliance requirements around the world have made the platform constantly adjust and adapt to the issuance and trading rules of RWAs. In addition, in the early stages of the ecosystem, how to prove that on-chain finance has advantages in capital efficiency and investment costs compared to traditional finance, and attract more institutions and investors to actively participate will also become the key to the success of the project.

(This article does not constitute investment advice and is for readers ' reference only)