Last Saturday, Dr. Zhou and Terry Lam from NUTS Finance held a special AMA named “From Defi to Open Finance”. They shared options about the future of Defi and open finance. We received many questions before and after AMA. Thank you so much for supporting QuarkChain. Here is the AMA summary, please take a look.
Q1: Many community members may never hear about NUTS Finance before. Terry, will you please introduce yourself and NUTS Finance?
Sure, my background spans across primary and secondary capital markets covering commercial and product strategies. I started my career with S&P Global, a U.S. credit rating agency in driving product strategies for the investment management segment. After leaving the corporate world in 2016, I started a foreign exchange trading affiliate platform. This project actually angled me into the crypto and blockchain space.
My partner and I started NUTS Finance in 2018, with the motivation to improve capital efficiency for the traditional financial system. We spent the first year exploring different ways to effectively leverage blockchain technology in financial applications. We realized the potential of the technology but at the same time quite challenging to build financial applications on the blockchain (ie. demand for security, blockchain dev expertise + financial domain knowledge). Then we spent 2019 designing and building the NUTS Platform, our flagship technology solution for simple issuance of multiple classes of financial instruments on public blockchains.
In short, NUTS Finance is committed to building open source technology to enable financial application builders. The name NUTS Finance actually represents nuts of bolts of the open financial system.
Q2: Defi is a really hot topic since last year, but most people are still unfamiliar with it. Terry, will you please explain to us what is Defi? What is its advantage over traditional finance?
DeFi stands for decentralized finance, the key ideology is to democratize financial services and products with the help of blockchain technology.
In other words, to enable anyone (ie. small businesses, corporates or anybody within the wealth pyramid) to have uninterrupted access to financial services and products (interruptions could be caused by censorships, regulations, capital control etc.).
Relative to traditional finance, some referred to as CeFi (centralized finance), the benefits of DeFi is by far its broadened accessibility and efficiency. In terms of accessibility, you can think of it as anyone with a digital asset wallet and internet connection can have access to financial applications on the blockchain. In terms of efficiency, just think about the number of steps you would need to go through in order to shift your stock portfolio to different asset classes such as FX, ETFs, short-term notes, etc.
With that being said, we believe there are still a number of pieces to round out before the market sizing of DeFi can catch up to that of traditional financial markets (ie. fiat on/off ramp, security, network capacity, product offerings).
Our project motto is ‘Define DeFi’, meaning we strive to create and provide accessible tools to enable participants to shape the open financial system. Ultimately, our view of an utopian open financial ecosystem should possess the following attributes: efficiency, accessibility and security.
Q3: We have a lot of expectations for Defi. Defi has been facing many other pain points except for safety issues at this stage. Dr.Zhou Can you talk about what problems need to be solved from the perspective of public chains and applications separately?
Right now, the most popular DeFi applications are on Ethereum, and the biggest one is MakerDAO. However, there are a couple of issues that Ethereum exhibits for DeFi
1, Scalability. Ethereum’s low scalability means that the network can be easily congested (which happened a few days ago)
Once the network is congested, people can hardly issue tx to the network, and thus the network is essentially unavailable. This happened for CryptoKitties, FOMO3D, etc. And recent congestion is another example. This issue will happen forever as long as Eth’s scalability problem is not solved
2, The inconvenience of using non-native tokens for DeFi.
Ethereum has two types of tokens, native one (ETH), and ERC20 tokens. Unlike ETH, ERC20 likes a second-class citizen.
The ERC20 cannot be used to pay gas directly, cannot be used to perform transfer-and-call (which means users need extra step to use ERC20 to join DeFi)
3, Is about the transaction fee (and it is related to scalability). Once the network has a considerable number of tx pending, the user has to raise the tx fee. Such an issue becomes more severe if a complicated DeFi is performed (such as deploying a CDP contract), and the cost may be 1–2$. If the fee goes high enough, the participation of user will be suppressed.
Q4: QNUT is actually a DeFi application editor. Who is using this editor? Why do we need to use this editor?
QNUT represents NUTS Platform on QuarkChain. Our motivation for QNUT is to make the lives of financial applications much simpler. Also, to accelerate open financial applications through leveraging the full potential of the QuarkChain network.
Our targeted users include Financial Service Providers (FSPs) who are interested in integrating blockchain technology as part of the financial instruments issuance process.
But please keep in mind that our definition of FSPs in the open finance context includes both businesses and individuals; because we believe blockchain technology enables individuals to compete with financial institutions on a leveled playing field.
Core value proposition of QNUT includes:
1/Non-technical teams friendly >> our plug-and-play front-end provides a simplified instrument issuance and exchange market organization workflow. Application builders can leave the technology to us, while they can focus on the business operations.
2/ Modularized >> we emphasize modularized technology solutions, meaning we provide users with a high degree of autonomy in choosing the components to build their custom financial application. All in consideration of upgradability and security.
3/ Cost effective: This relates to what Dr. Zhou mentioned earlier, QNUT can support the issuance of complex financial contracts at a significantly reduced cost due to QuarkChain’s breakthrough in TPS and code size limitation
Q5: As we all know, QuarkChain is a high-performance public chain which applying sharding technology, and DeFi is the area where all high-performance public chains will have some plans. Algorand, Polkadot and Cosmos all launched their own DeFi projects. What’s the strategy of QuarkChain in DeFi? How can QuarkChain stand out from other public chains?
Since its inception, QuarkChain aims to become the next generation of the DeFi network. With goals such as high scalability, low transaction fee, and more friendly to DeFi applications. Thanks to our Boson consensus technology that we made in-house:
1, for scalability, we utilize horizontal scalability so that the system capacity can be increased as the network usage increases.
We hold a TPS competition this year, and our community member can reach 1M TPS using our public code.
In the case of network congestion, if a shard is congested due to a popular event, the rest of shards can still work and thus the availability is greatly increased
2, High throughput of QuarkChain also results in low transaction fee, range to 10x to 100x lower. This allows the prosperity of DeFi applications
3, Multi-native token. QuarkChain allows developers to issue their native assets and use the native assets to directly pay transaction fee and transfer value in DeFi activities.
This greatly simplifies the barrier of the users of the DeFi applications — the users do not need to have QKC at all.
And the developer can unify their development process to deal with native token only
4, Composability of cross-chain DeFi: While there are multiple shards running, there will be challenges as to how to use cross-chain protocol to join DeFi applications on different shards.
This is also known as the problem of composability. In fact, the founder of Ethereum Vitalik penned a post where he delineates how the future ETH2.0 will realize the composability of cross-chain DeFi: https://ethresear.ch/t/cross-shard-defi-composability/6268 In fact, QuarkChain already implemented Vitalik’s vision, through multinative assets, users can seamlessly participate on the DeFi activities of all shards anytime.
With the collaboration with NUTS Finance, we are expecting to reshape the area with the following improvements:
1, Significantly lower the hurdles of DeFi: through NUTS Platform, we would allow any users to issue standardized financial products more easily. Using QuarkChain’s high throughput and low transaction feeds, we will attract more users to participate in DeFi
2, Improve user experience: through issuing QNUT native token, users only need QNUT to enjoy all services on NUTS Platform, including creating contracts for financial products, provision of liquidity, and so on.
3, The first project that supports the composability of cross-chain Defi: NUTS Platform will be the first blockchain project that supports the composability of cross-chain DeFi. Even though the user sets up multiple DeFi contracts on multiple shards, all users can enjoy the services that are provided by the contracts on different shards.
4, Build a high-performance DeFi platform: QuarkChain will provide full support for the NUTS platform, including seamless support of QuarkChain wallet for QNUT, support of advanced transactions on the upgraded DeFi platform, and other special businesses.
Q6: QuarkChain has published an article on multi-native tokens. Dr. Zhou, can you first introduce what is multi-native tokens in simple words? and what are the benefits of issuing native token? QNUT is the first native token released by QuarkChain. Terry, would you please explain QNUT’s token economy?
The multi-native tokens aim to overcome the issue of ERC20 as I mentioned before.
The specification of multi-native tokes can be found here: https://github.com/QuarkChain/QCEPs/blob/master/QCEP/qcep-5.md
Where QCEP stands for QuarkChain Evolution Proposal
1, The native token has the same right as QKC except the right of governance. User can use the native token to pay transaction fee, and transfer value directly
2, A native token will have a unique ID (such as QKC, QNUT) and the ID will be issued to an owner by a simple auction system.
As long as gaining the ownership of the native, the maintainer could mint, burn the native token, and set the exchange ratio to QKC as transaction fee. The full feature will be ready in Q2 2020.
As mentioned, QNUT is a native utility token on the QuarkChain network, meaning there are 2 essential use cases for the QNUT token.
1/ Users need to collateralize QNUT in order to utilize the NUTS Platform to issue financial instruments
2/ QNUT can also be used as gas to execute NUTS Platform smart contracts on the QuarkChain network. This is a game-changer thanks to the multi-native token setting.
Simply put, the QNUT token adopts a work token economics model since QNUT is posted as collateral in order to perform any functions using the NUTS Platform.
This also means the intrinsic value of QNUT has a linear correlation to the usage of the NUTS Platform. The more open financial application builders leads to increased usage for QNUT token.
Also, QNUT was designed to be an integral part of the open finance ecosystem as we are working toward supporting the transfer of cross-chain assets where the NUTS Platform is deployed. This further drives utility for the QNUT token.
Q7: QNUT recently announced the IEO plan on lbank. Terry, can you tell us how to participate in the IEO?
We are excited to announce the initial listing of the QNUT token on LBank.
QNUT will be available for subscription starting from March 23, 2020 at 14:00 (UTC+8) to March 23, 2020 at 17:00 (UTC+8).
Users will need to go through KYC before participating, some restrictions may apply.
For subscription details, please visit the LBank Solar listing page. Please check more details here: https://lbankinfo.zendesk.com/hc/en-gb/articles/900000322043
Q8: Why do NUTS Finance cooperate with QuarkChain better than NUTS Finance cooperate with Ethereum ?
We are also building on the Ethereum network. In fact we already launched on the Ethereum Rinkeby test late last year. We value the Ethereum ecosystem highly due to the head start it has on financial applications, user base and asset size.
However, as we evaluate the current DeFi projects on Ethereum, we noticed a limitation with regards to the transaction cost. I am not sure how many of you tried to close out a CDP position or repay a loan on any of the existing DeFi protocol on Thursday? But you’ll notice the transaction cost skyrocketed during that period of time, not to mention the timeliness. This is a bottleneck which led us to collaborate with QuarkChain. The breakthrough TPS on QuarkChain can avoid situations which we faced this past week on the Ethereum network.
Q9: What are the main utilities & Real-life use-case of Nuts Finance platform and QNUT tokens? What we can do with QNUT Tokens?
The main use cases of NUTS Platform are:
(i) Issue financial instruments such as loans, swaps, forwards
(ii) Manage the lifecycle of the instruments (from issuance to completion or default). All instrument lifecycles are managed on-chain.
In simple language, this means anyone with access to the NUTS Platform can become an underwriter of a financial instrument and launch your own marketplace.
Also, after underwriting the instrument. You can manage the instrument with our front-end. This is what we mean by democratizing financial services and products. Regarding to killer features; it would have to be our proposition for non-technical friendly teams and or individuals.
Our plug-and-play front-end provides a simplified instrument issuance and exchange market organization workflow. Leave the technology to us, our users can focus on the operations.
Regarding the user base, as mentioned previously our targeted users include Financial Service Providers (FSPs) who are interested in integrating blockchain technology as part of the financial instruments issuance process.
But please note that our definition of FSPs in the open finance context includes both businesses and individuals; because we believe blockchain technology enables individuals to compete with financial institutions on a leveled playing field.
We believe Open Finance is one of the pillar application of blockchain technology because the attributes of blockchain (accessibility and efficiency) solves many of the existing problems in the traditional financial system (lack of transparency, information asymmetry).
Our project motto is ‘Define DeFi’, meaning we strive to create and provide accessible tools to enable participants to shape the open financial system. Ultimately, our view of an utopian open financial ecosystem possesses the following attributes: efficiency, accessibility and security.
Our biggest comparative difference relative to other DeFi project is that our vision is to enable an open financial ecosystem. We are not decentralized ideology maximalists; but rather we are building towards a more efficient, accessible and secured fiancial ecosystem. Thats’ why we aim to integrate the best features from both worlds (DeFi and CeFi) to enable Open Finance.
Also, we are tackling the open finance problem from the ground up. Meaning, our plans is to deploy our tech solutions across public blockchains. Rather than just solely focusing on Ethereum, which alot of DeFi projects are trending towards. We believe the importance of cross-chain asset interoperability, this is one way to cultivate a true open financial system.
As mentioned, the fundamental use cases for QNUT are:
1/ Collateralize QNUT to use NUTS Platform to issue and manage financial instruments (ie. if you want to structure an uncollateralized lending instrument, you would need to collateralize QNUT tokens)
2/ Use QNUT as gas to execute NUTS Platform smart contracts. This is similar to using ETH to pay for gas on the Ethereum network, which only native tokens can support
In short, if you foresee yourself underwriting financial instruments and creating a market of your own (instead of relying on existing DeFi platforms), you would need to use QNUT tokens.
Q10: What’s the main Mission & Long-term Vision of NUTS Finance? What’s the Future Roadmap looks like? & Which developments can we see / expect from Nuts Finance in future?
Our mission is to enable financial application builders. Through providing open source plug-and-play technology solutions. Our vision is to enable an open financial ecosystem
Q11: One of the biggest problems with DApps is inactive and useless state. People just create DApps but it has no use cases nor contribution to the blockchain ecosystem. To prevent and resolve this problem what will NUTS team do?
This is one of the biggest problems of DApps. And our view is that adoption is lacking for Dapps in general. Our approach is to design plug-and plug solutions for FSPs so they can utilize blockchain to offer competitive financial products and services.
We believe DeFi applications has proved its advantages over CeFi (yield, convenience). Now the question is, how to attract more builders. And that’s what our solutions aims to do.
Q12: Can you tell us some recent achievements & Future plans of Nuts which attracts me to invest in IEO ?
We launched the NUTS Platform on the Ethereum Rinkeby testnet late 2019, beta is currently open for testing.
Our goal for 2020 is to deploy on the QuarkChain network and work towards cross-chain asset transfer. This would enable a flow of assets into other public blockchain and drive more financial applications outside of the Ethereum network.
Q13: Can you share , what are the main Competitive Advantages of Nuts Platform? Why should we use Nuts platform rather than other similar platforms?
You probably missed the first part of the session. But the core value prop includes:
1/ Non-technical teams friendly 2/ Modularized (highly customizable) 3/ Cost effective (for simple financial contracts and complex financial contracts).
Q14: While some of DeFi projects are all facing serious limitations in terms of usability, accessibility, convenience and diversity of investment options, How will Nuts Finance be different than others?
I think we all noticed the bottleneck this past week! We foresee this as a major issue, and that’s why we are working hand in hand with QuarkChain to redefine the next gen DeFi ecosystem due to their breakthrough in sharding technology.
Enhanced speed, reduced cost, native token settings are all solutions to the existing problem we are experiencing on existing DeFi products.
Q15: Can you tell us which technologies & Blockchains are used by Nuts Finance in its platform? What can any user do with Nuts Finance?
Essentially our solution is a smart contract platform designed specifically for financial application use cases (separating financial instrument states from smart contracts).
Regarding the specifications, I’d suggest you to go through our technical doc on our website first. https://docs.nuts.finance/
Q16: What can the impact on DeFi be of the partnership between NUTS & QuarkChain and what will be the role of the QuarkChain network?
Really good question! First, QNUT is the first multi-native token on QuarkChain.
Second, our deployment on QuarkChain can fully leverage Quark’s transaction speed. Meaning our users can underwrite complex instruments (think forward contracts with multiple parameters) at a much reduced cost relative to the Ethereum network, which means, this really opens up the diversity of financial instruments on blockchain. Currently, most of DeFi instruments predominately loans. With our partnership with QuarkChain, we can enable multiple classes of financial instruments, benefiting end users
Please join the QNUT community if you have any question about IEO and NUTS Finance.
To learn more about NUTS Finance:
Project details: https://docs.nuts.finance/
Beta testing is now open, join the waitlist by sending us an email at firstname.lastname@example.org
You can also learn more about the QNUT Token subscription on LBank: https://lbankinfo.zendesk.com/hc/en-gb/articles/900000322043
Thanks for reading this. QuarkChain always appreciates your support and company.