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Cult DeFi architect Andre Cronje has announced a new decentralized stablecoin exchange protocol called Fixed Forex.
Andre Cronje Unveils Fixed Forex
Andre Cronje has built a new DeFi protocol based on the forex markets.
Cronje announced the project, called Fixed Forex, in a Friday blog post. It lets users mint and exchange various fiat-pegged stablecoins, including the U.S. Dollar (USD), Euro (EUR), South African Rand (ZAR), Japanese Yen (JPY), Renminbi (CNY), and others.
Cronje, who’s best known for building a range of notable DeFi projects including Yearn Finance, Keep3r Network, and multichain.xyz detailed his new venture in the announcement. He explained how users can mint fiat-pegged stablecoins and exchange them with other assets on the Ethereum network.
Users will need to provide collateral in the form of other crypto assets to mint any stablecoins through the protocol. To mint the fiat-based currencies, the protocol will calculate Loan-to-Value (LTV) ratios and accept collateral dynamically in accordance with lending protocols like Compound, Aave, and Cream Finance’s Iron Bank. Cronje noted that the amount available to mint against collateral would be proportional to the on-chain liquidity available on Fixed Forex.
Furthermore, contrary to decentralized stablecoin issuers, Fixed Forex has incorporated “gentle liquidations,” a mechanism that ensures a users’ collateral does not get fully liquidated during a market drawdown. Instead, the protocol will liquidate only a minimal amount of funds to repay the debt and maintain the collateralization ratio.
The Fixed Forex contract is currently unaudited, and hence it is risky to add funds other than for experimental use. According to Cronje, the final release of the project will be deployed on top of Curve Finance.
The foreign exchange market currently represents an estimated $6.6 trillion in value. Despite the immense size and popularity of forex in traditional markets, it has largely remained outside of Ethereum’s booming DeFi ecosystem. This may due to the complex dynamics within forex markets, as well as the slow transaction times and high fees that Ethereum can be prone to.
If successful, Fixed Forex may be one of the first projects to overcome the challenges of implementing a large-scale decentralized forex exchange on Ethereum.
Disclaimer: Andre Cronje is an equity-holder in Crypto Briefing.