The meteoric rise of the DeFi ecosystem in blockchain has been powered by increasingly innovative ways to save, lend, trade and utilize blockchain secured digital assets.
Platforms like Uniswap enable you to list assets and trade them in a fully trustless and transparent way. Aave, Compound and dXdY enable you to earn interest against your tokens. Synthetix is bringing blockchain native financial derivatives. The DeFi floodgates have been opened and there is no shortage of highly innovative projects making their vision of a more inclusive financial future — a rapidly approaching reality.
Underneath all of this hype and innovation, it’s easy to forget that we still haven’t completed the open finance puzzle. One of the key elements missing in this puzzle is — real world assets.
Houses, apartments, renewable energy power plants, land, traditional financial instruments, company equity and much much more — are all locked away — not to be used or seen by the blockchain market. Five hundred trillion dollars in assets — just waiting to be brought to the open finance movement.
While there are a lot of noteworthy projects tokenizing and securitizing on blockchain — they are overwhelmingly centralized. It’s usually structured like this — there is a company, which promises to mint blockchain tokens which are equivalent to some real-world asset — such as real-estate. We, as the holders of the blockchain token — need to be extremely careful which tokenization platforms we trust, spend a huge amount of time researching and vetting legal compliance, trustworthiness and the people behind it — to make a decision whether the tokens we hold are actually covered 1:1 by real-world assets — or are just pretending to be.
This process is not open and it’s not in the spirit of the DeFi movement — but that’s not the real problem. The real problem is that this approach is impossible to scale. Imagine having hundreds of tokenization platforms for dozens of asset classes and coordinating which ones you trust, which ones you don’t and which ones you might. It’s a logistical nightmare and — it’s never going to work.
Verifiably trusted assets
This is the reason why at AMPnet — we’ve decided to build a platform which can support the creation and operation of thousands of independent tokenization platforms and enable users to effortlessly verify the integrity of the tokenized assets.
So how do we do it?
The solution holds two parts — the AMPnet APX Protocol and the AMPnet Tokenizer Builder.
AMPnet APX (Asset Platform and eXchange) Protocol
The APX Protocol aims to have thousands of independent tokenization platforms attached to it — tokenizing, trading and verifying real-world assets. We achieve this by allowing anyone to join the platform. Whether it’s existing crowdfunding platforms, equity funds, real-estate companies, renewable energy investors, VC’s or even private people — if they have assets and a way to convert them into blockchain tokens — they can join (AMPnet also makes this “have a way to convert them” part very easy — but more on the in the section about the “Tokenizer Builder”).
The APX Protocol provides a way to guarantee that assets issued on the blockchain match the assets in the real world to anyone using any of the tokenization platforms attached to APX.
We achieve this by employing an independent system of decentralized Auditors who are tasked with continuously verifying the tokenization platforms and giving them a risk score, complexity score and reporting them if they find anything suspicious. The Auditors are rewarded for this behavior by having APX tokens sent to their blockchain address. For each tokenizer, once a week, the protocol selects nine Auditors at random from the Auditor Pool and tasks them with verifying the integrity of the assets on that tokenization platform.
Beyond this — each tokenization platform must deposit a certain amount of value into a mandatory liquidation reserve. How much they need to put in is determined by the risk factor assigned to them by the auditors and is expressed as a percentage of their total asset value. The liquidation reserve is distributed to token holders in the case that the tokenization platform is found to be malicious or incompetent.
This ensures that high-risk tokenization platforms which might not be fully auditable have a reserve from which their users can get a proportion of their money back in the case of trouble.
The APX DEX
The APX Protocol is connected to a tightly integrated DEX on which all assets which receive a satisfactory audit by the protocol can be listed. The DEX enables decentralized, permisionless trading of all of those assets.
The DEX will be implemented by using an Automated Market Maker with a Constant Product Formula implementation. You can read more on that here.
The DEX will have many specialized features, making it a better fit for real-world assets such as filtering by asset class, country and legal structure as well as some APX specific features such as filtering by APX Risk Score.
The DEX has a transaction fee which is used to buy APX tokens through our Automated Token Buyback mechanism (which will be explained below)
APX Trusted Synthetic
We don’t want our users to be limited to our in-house DEX, though. We want all assets to be a part — and a catalyst — of the growing and dynamic DeFi movement.
This is why the APX Protocol enables anyone to issue a trusted synthetic. A trusted synthetic is a token which wraps one or more APX verified assets. The trusted synthetic is a freely-tradable ERC20 token. Each trusted synthetic inherits security from the underlying APX protocol and has a derived risk score dependent on the underlying assets.
By issuing a trusted synthetic — APX users are free to trade, stake and earn interest on their real-world assets on any DeFi protocol — without any limitations.
There is a cost associated with issuing a trusted synthetic which is expressed in percentage of value per year (e.g. 0.3%/year) and is used to buy APX tokens through the already mentioned Automated Token Buyback mechanism which will be explained below.
The APX Governance Token
The APX Network is a fully decentralized entity run by the governance token holders. There is a mechanism for representing passive token holders through the use of a Polkadot-like Council mechanism.
The Council and the APX Token holders vote on changes to the protocol and on various fees which are incurred on the network.
The APX Token is an ERC20 token — issued on the Ethereum network.
Automated Token Buyback Mechanism / Treasury
To make sure that the people who are investing into APX are rewarded by the increase in the price of APX token — every time a fee is incurred on the APX network (DEX Trading Fee, Trusted Synthetic Maintenance Fee, APX Listing Fee, etc…) — the entire amount of that fee is used to buy APX tokens on a DEX.
These tokens are then sent to the APX Treasury — where they hold no voting rights and are locked. The only way to unlock the tokens is through a governance vote — approving the treasury funds for certain uses which benefit the network.
Learn more on why we move tokens to the treasury and not burn them in this excellent article by Placeholder VC .
The AMPnet Tokenizer Platform Builder
Even when you have a protocol for verifying assets and putting them on blockchain — building the tokenization platform itself is very complicated. This is why we introduce the AMPnet Tokenizer Platform Builder.
The Platform Builder enables anyone to create their own, APX compliant, tokenization platform in minutes. You can check out the tokenization builder at https://ampnet.io and even try a demo for yourself.
If you would like to use only some of the features of our Platform Builder and build the rest yourself, we have excellent developer docs at https://docs.ampnet.io
The concept is very similar to how Substrate enables the easy creation of Polkadot blockchains.
Kickstarting the Tokenization Revolution
By ensuring a level of trust in the tokenization of assets and making it extremely easy and cheap to build fully-featured tokenization platforms — AMPnet will be the piece of the puzzle which will kickstart the tokenization revolution in the DeFi space
AMPnet is currently running a private token presale for larger ticket sizes — contact us at firstname.lastname@example.org for details.