Japan’s Crypto Garage Is Raising the Bar for Bitcoin-Based Cryptofinance Products
This is a sponsored article provided by Crypto Garage.
At Tokyo-based Crypto Garage, innovators are working to create a wide array of specialized cryptofinance tools to help facilitate a transformation of our financial world into one based on the values of Bitcoin: transparency, security and decentralization.
“We see a world where there is a platform for various types of assets that can be transacted without counterparty risk,” as Justin Dhingra, chief cryptofinance officer at Crypto Garage, put it. “Our service is not here to replace the existing financial infrastructure, but instead give the end customer, ranging from consumers to institutions, a choice to conduct different types of financial transactions on a peer-to-peer (P2P) basis.”
Crypto Garage’s DNA in Bitcoin
Crypto Garage seeks to become the leading architect of products in the cryptofinance space, which it defines as a specialized field that integrates modeling and structuring from financial engineering, cryptography and Bitcoin technology.
In terms of how this vision can interact with the world of Bitcoin, Crypto Garage believes that security is paramount for building a financial infrastructure and that Bitcoin is the only protocol that is suitable for a secure network.
The company has been active since 2018, when it was founded as a partnership between Digital Garage, Tokyo Tanshi and Blockstream. Digital Garage is a Tokyo Stock Exchange-listed company and started its research in the Bitcoin protocol in 2015 in collaboration with some leading Bitcoin Core developers. DG Lab, Digital Garage’s research and development organization, continues to work on advancing the Bitcoin protocol by supporting core protocol developers. Digital Garage is also an early investor in Blockstream. Tokyo Tanshi is a well-established money market broker in Japan with 100 years of history.
Pushing Bitcoin Cryptofinance Applications Forward
Building up a company that seeks to leverage the concepts of financial engineering, cryptography and Bitcoin technology has not been a straightforward or easy task.
“Our approach is to go after long-term tech but still win short-term business,” Dhingra said. “In 2019, we broke ground on the announcement of our digital asset settlement application called SETTLENET on Blockstream’s Liquid Network. With SETTLENET, digital assets can be settled simultaneously using atomic swaps. The instant settlement is an attractive feature for trading purposes where one counterparty no longer needs to worry who pays first when settling a trade. SETTLENET seeks to apply the decentralized, P2P, trust-minimized principles of Bitcoin to the trading community.”
SETTLENET’s expected launch date is set for June 2020.
For the long term, Crypto Garage aims to spread cryptofinance products through Bitcoin, Lightning and the Liquid Network, and one key technology it is working on is the Discreet Log Contracts (DLCs) protocol.
DLCs enable the creation of monetary contracts directly on the Bitcoin blockchain, using an oracle for determining its outcome, but without having to reveal the existence of the contract to the oracle. As with regular contracts, parties first need to agree on the terms, such as the different payouts for the possible outcomes. They then pre-commit their collaterals in a Bitcoin transaction broadcast to the blockchain, and can unilaterally redeem their payouts at contract maturity using a signature from the oracle over the outcome value. Using the Bitcoin blockchain removes the need for an intermediary third party, while also mitigating counterparty risks.
The first natural applications of this kind of technology are financial contracts, such as options, futures and derivatives and Crypto Garage is testing the possibilities of this technology. In 2019, Crypto Garage traded a financial contract linked to the price of BTC/USD with Blockstream and a U.S. equity option settled in bitcoin with Skew, a crypto derivatives data platform company, using DLCs.
From the lessons learned from 2019, Crypto Garage is working on an application based on DLCs called P2P Derivatives that enables trust minimized derivative transactions between two parties. Crypto Garage expects to release an MVP version of the application around May 2020. With the MVP, Crypto Garage hopes to stir interest for further development and usage of DLCs and P2P cryptofinance products.
To continue to push Bitcoin-based cryptofinance applications, Crypto Garage wants to see more progress in the development of best practices for open-source technology within the Bitcoin industry. As one example, the P2P derivative product is based on open-source specifications for DLCs jointly developed with Suredbits. Crypto Garage is actively looking for more contributions to these specifications, so if you are interested, feel free to reach out directly on the GitHub repository. If you have an interest in beta testing its coming P2P derivatives application, contact the Crypto Garage team at [email protected] Crypto Garage will continue to work closely with the Bitcoin developer community and contribute with OSS.
Make History With a Decentralized Trustless Financial Infrastructure
At Crypto Garage, the team believes that the role of a thriving and decentralized trustless financial system will be a hugely transformative force for people all around the world.
The financial market is currently a selective market limited to professional financial institutions and corporations, and derivatives contracts are traded based on the trustworthiness of one party able to pay at the expiration of the contract. A good portion of the world still does not have access to the financial market and financial contracts due to not having a bank account and cannot enter into financial contracts freely with anyone in the world. Crypto Garage hopes features like atomic swaps for instant settlement and DLCs for a more trust minimized financial contract framework will bring us closer to a decentralized financial system.