Institutional DeFi

Project Description

What

Qredo offers a trustless custodial platform for the tracking and settlement of crypto-assets, solving the security and counterparty problems surrounding the management of private keys in a central location. Resultantly, the technology eliminates the need to pre-fund wallets on exchanges, unlocking a multitude of benefits that include access to prime brokerage services with no counterparty risks or security concerns.

Qredo tackles the single-point-of-failure risks existing cryptocurrency holders face when dealing with “private keys” through the introduction of a consensus-driven multi-party computation (MPC) network and a decentralised custody solution.

Aside from enabling secure and “decentralised” custody, the Qredo network can also act as a secondary highway where assets can move and settle quickly. A fast-finality blockchain can easily turn into a mechanism for solving the problem of fast payments and delivery of digital assets. 

Therefore, Qredo sees its technology as one of the foundational pieces of infrastructure necessary to deliver smart-contract-based financial services (similar to DeFi protocols on Ethereum) to institutional-grade market participants.

Embarking on this “institutional DeFi” vision, the Qredo team aims to take the first step with a soon-to-be-launched cross-chain automated market maker (AMM) that will sit on top of its decentralised custody platform and fast-finality blockchain.

The AMM will serve as a cross-chain decentralised exchange, allowing users to trade crypto-assets of any sort on a peer-to-peer basis with any other counterparty at near-instant speed. The Qredo AMM hopes to solve the liquidity fragmentation problem in crypto, enticing deeper-pocketed investors to enter and deploy capital.

Why

Target Market

  • B2B: Investors & Liquidity Providers (LPs) — institutional-grade investors and LPs that want easy access to prime brokerage services and do not want exposure to the counterparty risks created by exchanges (wallet pre-funding) or centralised custodians. Investors who are also looking to enter crypto, but are turned away by shallow order books and the fragmentation of liquidity due to the wallet pre-funding problem and the lack of interoperability between layer 1 crypto-assets.
  • B2B: Exchanges & OTC Desks — Exchanges and OTC desks that are looking for ways to attract more institutional-grade investors to their venue and/or are looking for new revenue opportunities.
  • B2B: Custodians — custodian providers that wish to extend their custodial services such as prime brokerage, access to real-time trading opportunities, or access to yield-generating investment opportunities DeFi has to offer.
  • B2B2B: OMS/EMS Providers — trading technology providers that want to offer their clients access to the cryptocurrency market without the headache of having to take on the counterparty and security risks involving pre-funding wallets at exchanges or private key management.

Value propositions

  • Omits counterparty risk — since control over the assets is no longer relying on centralised “private key” ownership, threats from counterparties are mitigated.
  • Deepens liquidity — Qredo’s AMM aims to aggregate liquidity from all the wallets from its network that record ownership of crypto-assets on the underlying chains.
  • Lowers barriers to entry — Qredo lowers counterparty risks and deepens liquidity pools that can cater to larger orders, paving the way for institutional-grade investors to enter the market.
  • Increases flexibility — Qredo allows institutional investors/traders to trade, transfer or stake their assets easily with the approval of pre-authorised custodians in a more automated fashion.
  • Enables decentralised prime brokerage — Qredo’s technology will enable service providers to introduce trade credit for their clients with no counterparty risk. Trade credit allows investors to trade on exchanges without pre-funding a wallet. Qredo’s system allows a counterparty in a trade to view the funds that are in a user’s wallet without being able to access it. For instance, an exchange will be able to see all of the assets in the wallet of a hedge fund and provide it with the credit needed to facilitate the purchase of crypto assets on its platform. 
  • Creates new revenue opportunities — Market participants (such as exchanges) can participate in the Qredo network as a Validator and/or LP to earn a portion of the fees collected by the system.

How

Decentralised Custody

MPC is an alternative way of generating a signature with the same properties of a “private key,” but without actually exposing a private key to reduce counterparty or security risks.

Instead, MPC enables the creation of a private key-like signature that is split across appointed computers running the MPC protocol. One or several nominee custodians can coordinate the signing of transactions by the MPC protocol. These custodians can be anyone who the user trusts, for example, friends, family members or professional custodians. Therefore, should the owner of the assets residing on the underlying blockchain wish to trade, transfer or swap the assets, he/she must seek approval from their appointed custodians.

In a bid to ensure that the MPC service offered is not prone to single points of failure, Qredo uses its own blockchain whereby the nodes in the network are programmed to perform MPC as well as maintain decentralised consensus.

Qredo Blockchain

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Qredo’s protocol runs on a low latency global telecom network with customised node hardware designed for high performance. The blockchain validator nodes employ Tendermint as its decentralised consensus mechanism.

Today, coordination between nodes in the Qredo protocol is centrally managed and does not rely on token-driven economic incentives. Upon the launch of Qredo V2 (expected in Q1 2021), the Qredo token will be introduced in an effort to decentralise the network.

Since the nodes within the Qredo network must abide by certain technical standards, the network benefits from high performance, low latency and high availability. This allows Qredo to cater to institutional-grade practices such as high-frequency trading. Expected costs of running a node will be around $1,000 a month with an upfront cost of $10,000 to $15,000 and an expected breakeven after 1 year.

“Institutional DeFi” Applications

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Qredo’s blockchain will enable service-orientated protocols to be built on top. These protocols will be able to engage with crypto-assets from a multitude of blockchains.

Qredo V2 will introduce the first “institutional DeFi” protocol built atop its custody platform — a cross-chain automated market maker. Upon the launch of the governance token, Qredo aims to bootstrap liquidity through a liquidity mining program.

Token Economic Design (Not yet live)

  • Validators in the Qredo blockchain network must stake Qredo tokens to participate.
  • AMM protocol — for every trade executed by the AMM, 50 basis points will be taken as a fee. From which:
    • 10 basis points will be given to validators of the Qredo blockchain.
    • 40 basis points will be given to the AMM LPs.

Stage of Maturity

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Business Model Validation

Qredo Ltd (the for-profit entity dedicated to the global adoption and running of the Qredo network) will offer support services to the businesses that choose to adopt Qredo’s open-source technology.

Support SLAs encompass access to documentation, SDKs & APIs, tooling, quality assurance, insurance, dashboards, and on-demand assistance if needed.

  • Standard support (the UK working hours/5 days a week) — £50K
  • Premium support (24 hours/7 days a week) — £75K-£100K

The price points have been hypothesised following close engagements with the target user groups. However, they are yet to be validated in the form of a paying customer to date. The company aims to close its first paying customer towards the end of Q4 2020.

In addition, Qredo will continue to maintain their current 6 Validators on the Qredo protocol allowing the company to benefit from a share of the revenue generated from transaction fees on the network.

A full financial model is available upon request.

Product Development

  • Today — V1 main-net is live. Qredo V1 supports Bitcoin deposits / MPC-based custody. The team is adding more cryptocurrencies to the custody platform on an ad hoc basis.
  • Today — successfully passed several independent tech audits (records available upon request).
  • Today — the Qredo network is centrally managed. The network currently comprises of 6 nodes in several geographical locations.
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  • Q4 2020 — launching V2 test-net, which will include the AMM protocol
  • Q1 2021 — launching V2 main-net
  • Q1 2021 — transitioning from a centrally managed blockchain network to a token-powered delegated proof-of-stake system
  • 2021 and beyond — The Qredo network aims to onboard a total sum of 100 node operators.

Key Metrics

  • £4.3m total raised to date
  • 18 full-time team members:
    • 3 Leadership team
    • 13 Development
    • 2 Business Development (supported by 2 part-time employees and 5 agents)
  • £225k monthly burn rate
  • 33 asset managers and hedge funds onboarding (pilot program)
  • 5 tier 1/2 cryptocurrency exchanges (pilot program)
  • custodians onboarding (pilot program)
  • 1 OMS/EMS distribution partner onboard — HedgeGuard

Founding Team

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  • CEO, Anthony Foy (~39.7% equity)
    • Over 20 years of experience in VC backed growth companies.
    • 4 successful exits (2 listed on NASDAQ, 1 on NYSE, 1 sold to PE firm).
    • Led multiple acquisitions.
  • CPO, Brian Spector (~6.6% equity)
    • Founder and CEO of Miracl, which has become one of the fastest-growing cybersecurity companies in Europe.
    • Co-author of 5 cryptographic patents.
    • Creator of Apache Milagro.

Token Integration

Token Distribution Details

  • Estimated token market cap ~£40m.  
  • Investors in Qredo’s seed round will be granted with a percentage of the token supply (exact amount to be determined).
  • The final token distribution details are still to be determined. Some rough estimations:
    • 40% of the tokens will go to team and VC backers.
    • 10% will go to Qredo Ltd, 10% will be reserved for ecosystem development, and the remaining 40% will go to the community. This will include rewards for nodes and the AMM liquidity providers.
  • The supply of tokens is fixed, and neither LP rewards nor the node rewards will be paid for through inflation.

Token Utility

  • In the short-term, the token will be used for bootstrapping, e.g. for rewards for LPs of the AMM.
  • In the long-term, the token is crucial for governance and decentralization of the Qredo blockchain network.
  • Governance decisions will include power over the typical properties like fee structure, for example, the fees charged for the AMM and corresponding reward distribution.

Token economics model is available upon request.


Current Presence

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Existing VC Backers include:

  • Gumi Cryptos Capital (lead investor) – in-house technical and market expertise coupled with an extensive business network in the blockchain industry.
  • G1 Ventures – G1’s primary focus is on financial infrastructure and services and therefore offer market insights and business connections.
  • Maven11 Capital – Well connected and active in the blockchain industry.
  • Amnis Ventures – Broad range investment firm with connections across many different industries.
  • Borderless Capital – Borderless Capital focuses on the Algorand ecosystem and acts as a bridge between crypto and enterprise. Their team of cryptographers can offer technical advice and support if necessary.
  • Tokentus Investment — German-based venture fund investing in blockchain technologies.

This overview has been prepared solely for informational purposes and is not to be considered as investment advice. It does not purport to contain all of the information that may be required or desirable to evaluate all of the factors that might be relevant to a potential investor, and any recipient hereof should conduct its own due diligence investigation and analysis to make an independent determination of the suitability and consequences of any action.