Dennis Dinkelmeyer, Midas | Open Liquidity Architecture for Onchain Capital Markets

Okay, before I start, I want to say very clearly why we're doing this. We're doing this to bring any asset, any vault, any fund, any ETF, any stock, any bond onchain with atomic instant liquidity. That's the message. It's really around bringing assets on chain with deep atomic liquidity. Okay, let's start briefly.

Midas tokenization business. We bring onchain investment products onchain. Two billions in asset miss issued last year. $40 million in yield out paid out last year. We've been operating for three years with no incident.

Let's look at some data first. Um the presentation is on liquidity and that's really the key point. So why does liquidity matter? The data I'm referencing to here is adoption or collateral use cases in money market. Column on the right are traditional money markets, so real finance and then there are onchain money markets.

Let's look at some assets. US government bonds agency MBS. Uh I can't actually read it but somewhere between six and two trillion adopted and onchain money mark in offchain money markets and around 2 billion in in onchain money markets. massive category and really hope that someday crypto and DeFi scales to that extent. You could argue that solvency drives everything.

Solvency stability such as T bills drives the adoption to those markets. But liquidity trumps everything. And you see this along that equities or even Bitcoin which are volatile assets not exactly solvent but with very deep liquidity are integrated in very deep volumes. So really liquidity drives everything first and foremost. And this is really why we're talking about this very briefly.

Why do lending markets or money markets matter? They're very large asset class in crypto. And for an asset issuer bringing assets on chain. We talk about distribution. We talk about a lot of things all day but really to bring assets on chain you need to have adoption in lending markets.

Now why is liquidity not solved? We had many people here uh today talk about market makers we all love them. They have a hurdle rate of around 30%. 20 if you're really competitive. You might want wonder 30%.

That's that's absolutely crazy. Um well maybe you should go to the recck summit next door and talk to some of the security incidents that you see in crypto and they justify the high cost of couple. It's a very risky industry when you make 30% or targeting to make 30% and an asset turns over every four months. So some a user holds it for for for just over a quarter. You have an asset turnover three times a year and that would mean a 10% discount.

And these are real figures. So basically I make a market and I get 90 cents on the dollar when I when I make the market with the market maker and that's really it. It's counterparty risk, settlement risks and so on so forth. You can slice the dice in many different ways. Um you can look at short-term assets, different things.

It comes out of the same equation. Market makers effectively take settlement risk and counterparty risk and that really really prevents scalability of these assets. It's a really hard challenge to solve. How do we solve it? We build an open architecture for liquidity.

That's the first thing. First and foremost, we're not really just building our product. We're building an architecture how we think products can come on chain. So there are four liquidity mechanisms in our infrastructure. Number one, you redeem the standard way.

You make a request and you wait until the asset is settled. One or two business days, you receive the underlying funds. Then um there's an internal liquidity buffer. So let's say you you you you tokenize a private credit fund like we did last year with MF1 um and you say 10% of the assets are held in TUS that's basically liquidity sleeve that provides some buffer on chain that that that um also causes cash truck this is inside the collateral assets um and these are the the components inside the the collateral asset um the third mechanism which we we really sort of bringing and going to dive a little bit deeper in the next slide is MSL is mid at a stake liquidity and that's a dedicated pool of capital that's external to any collateral therefore not costing cash truck but equally settling redemption and number four there's the OTC market um our tokens are transferable composible and we love integrations to um and RFP platforms third party platforms in fact just um today we announced an integration to Infinifi where we're acting as a liquidator for a product and globally we just have announced so we're super excited about those things. Let's go on MSL.

MSL is a dedicated couple pool. It sits there. It's onchain. It's credible. You can see it.

You can verify it. And against this pool of couple, against any other asset you've issued, you can make a redemption call that's atomic. So instant. And you immediately receive your funds back. That's really a an infrastructure we've solved.

This is a little bit of the back end how it works. There's a couple pool, there's a dedicated compartment, there's a credit facility and how it works in the back end. But really how does MSL work and how does it solve this key challenge of liquidity? The key challenge of liquidity is settlement risk counterparty risk. It uses a mechanism of a risk buffer.

So when you redeem a 100 units of an M token, this is illustrative example. You might get back 90 cents of the dollar atomically instantly and then the underlying proceeds are settled. Once they're settled and clear the original venue, then you receive the the remaining 10 cents of the dollar, 11 if you have generated some yield or nine if you made some losses. Remember, if you go to vint directly, they will give you 90 cents of the dollar and keep the profit. In this infrastructure, as an issuer, we effectively wait for clearing of the asset, which is somewhere between 1 2 30 whatever the underlying asset is, and then settle this.

This is a risk buffer. that's determined token by token and allows you to really scale this. Um, so this is really a a piece that we have been inspired by by the concept of redemption or audit hold back in traditional finance. These are proven mechanisms and we believe they will really help to scale liquidity. The impact of this is actually quite dramatic and understated.

This is a product that we are launching or just announced with M Global. We'll make some detailed announcement on this. But when you have an asset that generates around 10% yield and you give it 20% liquidity, a cash truck would imply a 2 percentage point dilution. Here we're talking about this product generating 30% more returns than otherwise would be at no additional cost. That's a dramatic change.

Ultimately, this creates utility for assets. When you scan all asset classes, put them on a map between risk, reward, liquidity, you ultimately see as you go up the illquidity curve, you can generate higher returns at possibly no higher risk but higher liquidity. So this is a mechanism how we conserve this. We have a dedicated capital pool um that is um that's that sits on chain and the big announcement we we we we treat to last um last night is that this this couple pool is has grown to $40 million. So we're very excited about this and we'll we'll be rolling out selectively to a number of assets and we have interest from from many other market makers that want to plug into this infrastructure and even deepen this.

I want to reiterate it's an open infrastructure. Um, we we're very happy to work with third party RFQS, very third happy to work with others and and really scale this because it's a really important mission to drive the future of finance. That's it.