Archax and Algorand join forces to create smart financial products, including liquid alternatives.

Archax and blockchain provider Algorand will collaborate to create smart financial products that can trade on the newly FCA-regulated Archax digital exchange. These innovative new products include stablecoins and liquid alternatives. The latter are financial products, available in an ETF or mutual fund wrapper, that employ alternative investment strategies but can be bought or sold every day. (Archax)

“Challenger” financial products such as liquid alternatives

Archax was last week awarded FCA authorization as a digital securities exchange, VASP, brokerage, and custodian.

The exchange intends to broad-base its offerings of financial products beyond conventional assets such as equity, fund, and debt instruments.

Archax will develop these  “bespoke, regulated financial products” with blockchain provider Algorand.

Algorand’s mission is to remove friction from financial markets. On its website, it says it is the world’s first open, permissionless, pure proof of stake blockchain protocol. It provides security, scalability, and importantly, decentralization.

Its platform features smart contract capabilities that can handle billions of users. It can also process tens of millions of daily transactions at very low transaction fees.

Financial transactions and traditional contractual agreements often rely on paperwork. They also depend on the role of a third party to validate the fulfillment of the terms of the contract. However, this process is rather slow, cumbersome, and outdated.

On the other hand, smart contracts on a blockchain, such as those of Algorand, execute automatically (“trustless”) when such conditions fulfill.

Applications in the finance world that are amenable to smart contracts include escrow arrangements, loan payments and fee executions, collateralized obligations, automatic disbursements, home equity line of credit, and limit orders.

Graham Rodford, CEO of Archax said in a statement that the exchange wanted to work with leading blockchain providers to develop groundbreaking regulated financial products. He said Algorand was a perfect choice in this regard.

“We are now working with them on a number of challenger products – such as smart stablecoins and liquid alternative instruments, as well as those which will revolutionize the lending/borrowing/staking space,” he added.

New products for institutions

“The DeFi space is nascent and growing incredibly fast. “But there are a number of areas that need to be solved to make it institutionally friendly,” said Rodford. “The projects that we are undertaking together will help bridge the perceived gaps between the centralized and decentralized finance worlds.”

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Image: Turing Award winner Silvio Micali, Founder, Algorand