In a significant stride for decentralized finance (DeFi), Voltz, a pioneering protocol, recently introduced a feature allowing Avalanche users to trade interest rate swaps based on the Secured Overnight Financing Rate (SOFR). SOFR, a crucial global economic benchmark, is the interest rate charged for overnight loans backed by US Treasury bonds. The Federal Reserve’s Federal Funds Rate heavily influences SOFR.
⚡️ New market launch: SOFR rates on @avax!!⚡️— Voltz Labs ⚡️ (@voltz_xyz) May 24, 2023
Learn more about SOFR & why bridging this TradFi rate into DeFi matters 👇
Decentralizing Traditional Financial Instruments
SOFR took the place of the older London Interbank Lending Rate (LIBOR), providing a risk-free and transparent rate that accurately reflects the cost of borrowing cash overnight. Now, Avalanche network users can mitigate the risk of interest rate fluctuations through Voltz’s cutting-edge platform.
Democratizing Access to Financial Tools
Previously, traditional finance companies used SOFR-based interest rate swaps to guard themselves against the uncertainty of rate changes. They utilized these instruments to shield themselves from potential Federal Reserve rate hikes when borrowing was on the horizon.
With its innovative move, Voltz has transplanted this established financial product into the Avalanche network. This step opens doors to a wider set of investors, underlining the transformational power of blockchain technology.
Bridging the Gap between Small and Large Investors
Voltz Labs’ CEO and co-founder, Simon Jones, believes this novel offering could democratize financial markets. He highlighted how incorporating such traditional financial tools into DeFi could bring parity between retail investors and larger financial institutions.
A Convergence on the Horizon
We’ve seen traditional financial products slowly permeate DeFi, a testament to the future of finance. In April, INX, a securities broker-dealer, launched shares of Greenbriar Capital via Ethereum, complete with a compliance-friendly wallet for institutional use.
Similarly, Neobank rolled out its Soulbound token protocol, aimed at simplifying DeFi’s Know Your Customer (KYC) process. These developments mark a significant step towards integrating banks more closely with the booming Web3 ecosystem.
Debangshu is a content writer specializing in the Crypto and DeFi beats. Moreover, he holds 3 years of writing experience in technical niches. He has produced content for a wide range of publications and news outlets, ranging from cryptocurrency-oriented websites to corporate websites.