Financial swaps are the most widely used “insurance” tool on large commodity exchanges by companies and investors of all sizes around the world trading commodities from metals to corn.
If we look at the latest
The balance of supply and demand for most metals appears to be improving and the outlook for the medium-term demand forecast is positive due to increased spending on green and energy initiatives, which are metal-intensive.
It is for this reason that MetalSwap, by allowing decentralized commodity swaps to be executed without intermediaries, with reduced costs, and without time limitations, could become a key player in the finance sector in 2022.
However, in order to take advantage of the benefits of this emerging decentralized market for swaps in raw materials, it is important to know a little more about how the Metalswap protocol works.
Scalable Smart Contracts on the Ethereum Blockchain for Commodity Swaps
MetalSwap is built on smart contracts that are deployed on the Ethereum blockchain, the first network in the industry hosting the most decentralized applications and therefore the most secure and robust network on the market, after Bitcoin.
The logical programming of these swaps is designed so that the assets are swapped from fiat currencies/traditional financial products to crypto-currencies/assets from various blockchains through smart contracts written in next-generation programming languages under the scalable standard eWASM (Ethereum-flavored WebAssembly).
Ethereum WebAssembly is a proposed redesign of the Ethereum smart contract execution layer using a deterministic subset of WebAssembly, the big trend for scaling second-generation blockchain networks like Ethereum.
As a result, the basic operation of the swap remains the same as in traditional financial markets, but with more efficiency and full availability without human interference from, for example, profit-seeking commodities brokers.
As with all DeFi protocols, before completing the swap creation, it is necessary to grant permission to the smart contracts on the addresses used in the swaps. This enables the movement of various crypto assets from the addresses and the funding of new swap positions.
Once the allowance is granted (only needed once for each address) the swap is created and the funds placed in the various liquidity pools are allocated.
Furthermore, being deployed on scalable smart contracts using the industry-leading standard WebAssembly, MetalSwap paves the way to become a multi-chain platform that can expand its swaps to other blockchain networks such as BNB Chain (BSC), Solana, and Polygon, among others.
Fair prices with decentralized Oracles
To ensure a fairer and more accurate swap between assets, asset prices are connected to decentralized oracles that allow better latency in the feeds of the prices of the main assets consulted by users.
The foregoing guarantees better precision and independence from centralized servers with multiple failure probabilities (hacks, manipulation, unscheduled outages, etc.).
In order to obtain accurate and timely data for the assets involved in the swaps, oracles-based infrastructures running on the blockchain coordinate the collection of data from various sources, taking into account both the physical and financial trade in the underlying metallic assets listed on the exchanges.
For some of the 'swappable' crypto assets, it is sufficient to estimate the price based on trading on decentralized exchanges.
For others, it is necessary to retrieve current prices from data aggregators (Oracles) that collect and analyze the market from numerous centralized exchanges in order to avoid errors or manipulation.
A robust architecture
MetalSwap also envisages creating synthetic tokens that accurately reproduce the performance of real commodities in the metals and commodities market, on which the created swaps can be traded without intermediaries, 24 hours a day, seven days a week.
To ensure the proper functioning of swaps, Metalswap's technological architecture includes the best possible practices in the blockchain industry, in order to build a robust and secure platform that is easily auditable.
As you can see, the elements proposed in this architecture are added incrementally based on the technological blocks created previously.
This will allow MetalSwap to give rise to a dynamic ecosystem that will be able to adjust perfectly to the changing conditions of the industry, ultimately allowing it to be easily integrated with other graphical interfaces or financial projects.
Like any decentralized platform, MetalSwap includes various elements of the blockchain ecosystem such as data feed oracles, smart contracts, decentralized exchanges; and a key element in the ecosystem that differentiates decentralized financial platforms from traditional ones: decentralized governance (DAO).
Power to the community
The blockchain's fundamental disruptive theme is its ability to decentralize consensus and trust between unknown actors in any network of interactions and transactions; both issues central to the governance of any system including, in our case, that of commodity swaps.
In this context, for many blockchain experts, governance stands as an issue of crucial importance in the development of blockchain projects and their sustainability.
Blockchain governance spotlights the idea of managing the ever-changing state of blockchain needs and demands. There are currently on-chain and off-chain models in the ecosystem to exercise governance.
In the case of MetalSwap, the team has implemented blockchain governance by using its native XMT (on-chain) token. Through the platform token, XMT token holders can participate in decision-making within the MetalSwap ecosystem through on-chain voting mechanisms that are optimized for this specific network.
The decision-making body of the MetalSwap technological infrastructure is a "DAO" (Decentralized Autonomous Organization) governance structure consisting of all users in possession of the project token.
Thus, the XMT token will also be used to drive the participation of MetalSwap users through incentives and as a means for holders to participate in key governance decisions affecting features of the platform, fees charged, revenue distribution, and tokenomics.
In short, MetalSwap's DAO has complete control over:
-
protocol development decisions,
-
the proposals and implementation of new monetization models,
-
the distribution of the fees generated,
-
the technological features to be implemented, and
-
the creation of new pairs of crypto-assets and their liquidity pools.