The decentralized finance landscape is undergoing rapid transformation, with the XDC network at the forefront. As blockchain technology matures, innovative projects like Fathom Protocol are emerging, offering users a comprehensive and integrated DeFi solution. This article covers Tyler Carter’s journey and the development of Fathom Protocol, insights into Fathom Protocol and the XDC Network, the economic implications of borrowing against illiquid assets, insights on the inevitable transition to blockchain in traditional finance, and more!
If you happened to miss out on our podcast interview, you definitely don’t want to overlook these fascinating details!
Our Panel
Tyler Carter of Fathom Protocol
Tyler Carter, co-founder of DeSync Labs and a founding member of Fathom, an extensive DeFi environment established on the XDC Network, shared his journey in the crypto world, starting back in 2012. His interest in the global financial system led him to discover Bitcoin during a self-imposed sabbatical. He also became an early beta tester for one of the first integrated DEXs on Ripple’s XRPL. After spending eight years in the ETF business, he built and ran a digital asset group, achieving several industry firsts, including tokenized indices and hybrid ETFs combining crypto and traditional assets.
Carter then transitioned to a major tokenization firm, Securrency, where he helped secure the first SEC-approved tokenized securities before the company was acquired by DTCC. Alongside his DeSync co-founders, Anton and Manuel, Carter focused on solving the tokenization problem, particularly the lack of utility and distribution for tokenized real-world assets (RWAs). They spun off their team to form a new entity in Dubai and launched Fathom Protocol in January 2024.
“Big asset managers talk about this progression from mutual funds to ETFs, a technological progression, and moving from ETF to tokenization. That’s literally my script that was developed at the S&P 500 to convince S&P and asset managers who were joining us to join the tokenization train.”
Fathom Protocol aims to provide utility for tokenized RWAs by using them as collateral through a liquidity platform. Users can mint the stablecoin FXD using either crypto or tokenized assets like gold. FXD can be used for trading or other activities, and users can access Fathom vaults, which offer various trading strategies and asset exposures. Once users deposit FXD into a vault, they receive a share token representing their ownership. This share token can be used as collateral to mint more stablecoins or to be traded on secondary markets, enhancing liquidity in the tokenization space.
Moreover, Carter envisions a future where tokenized assets are seamlessly integrated into DeFi ecosystems, providing unprecedented liquidity and utility. With a stable swap DEX and a borrowing and lending platform, Fathom Protocol offers innovative ways to maximize asset exposure and leverage existing holdings, making it a groundbreaking solution in the evolving DeFi landscape.
The XDC Foundation
We are also joined by Quincy Jones, a Solidity developer with the XDC Foundation, who works on development for the XDC Network. He also assists other developers with their projects on the network and handles developer relations.
Additionally, Lance Lilly, who works in ecosystem development for the XDC Foundation, gave his thoughts during our interview. He frequently collaborates with Quincy and assists with projects building on the network. Additionally, he handles communication tasks and will represent the foundation at the Consensus conference, which is going on now, working in the booth and networking with attendees.
Exploring Tyler’s Insights: Implications for Fathom Protocol and the XDC Network
We sought Tyler’s insights into his experiences at Securrency, DTCC, and S&P Dow Jones Indices, as well as their implications for the Fathom Protocol. Initially, we were intrigued by his observations on the forward-thinking mindset of leadership within organizations like DTCC, especially in their embrace of emerging technologies like blockchains. Secondly, we delved deeper into the alignment between Fathom Protocol’s objectives and its target market segment, drawing from Tyler’s extensive background. Ultimately, we aimed to uncover the distinctive qualities of the XDC Network that attracted Tyler and his team to develop Fathom within the XDC ecosystem.
Initially, Tyler found himself educating senior leaders and sales staff about the significance of tokenization and crypto. However, he noted a shift in mindset over time, with more firms now grasping the importance of these concepts, marking a significant departure from the skepticism prevalent in earlier years.
Expressing some skepticism towards large-scale pilot projects, Tyler highlighted their historical tendency to stagnate without reaching fruition. He observed a growing sentiment among blockchain entities and other parties, disillusioned by the lack of progress in these ventures. In contrast, he commended initiatives like Blackrock’s for backing their statements with substantive investment, hinting at a broader shift toward action-driven strategies.
Regarding the XDC Network, Tyler revealed his early involvement as an XDC holder and emphasized the network’s pioneering role in introducing private subnets, aligning with his project’s requirements. He identified trade finance as a prime candidate for tokenization, underscoring the network’s focus on niche markets. Notably, over $100 trillion of capital markets can be brought onto the blockchain, which underscores the importance of specific blockchains targeting niche markets in this endeavor. There may be a future where multiple blockchains cater to specific markets, emphasizing the need for specialization in tackling the vast capital markets’ transition to blockchain technology.
Unlocking Economic Potential: Borrowing Against Illiquid Assets
Our audience wanted to know: what are the economic implications of being able to borrow against various illiquid assets like homes, cars, or gold? Specifically, we were interested in understanding the potential economic value this liquidity could unlock, considering that many individuals possess these types of assets.
Insights from Tyler Carter and Lance Lilly
Tyler Carter elaborated on the significant economic impact of unlocking liquidity from illiquid assets such as homes and cars. He highlighted the potential for retail individuals to access liquidity from their largest investments for the first time in history, paralleling the privileges long enjoyed solely by high-net-worth individuals. This democratization of access to private loans against assets could release trillions of dollars of liquidity back into the market. Thus, this could potentially stimulate the economy without increasing the money supply. Tyler viewed this development as a watershed moment, emblematic of the transformative potential inherent in DeFi and crypto.
Furthermore, he highlighted another significant scenario within the crypto space, a focus on large asset holders like founders or validators on blockchain networks. These individuals often have a substantial portion of their net worth tied up in assets they may not want to sell. By providing liquidity options for these assets, such as those held or staked for masternodes, it opens up a similar liquidity explosion potential within specific blockchains. This mirrors the economic impact discussed earlier but within the context of crypto-native assets, further underlining the transformative power of liquidity provision in the crypto ecosystem.
XDC ecosystem developer Lance Lilly also reflected on the potential of crypto assets and digital assets in financial transactions, noting how they are often not recognized as part of one’s net worth when applying for mortgages or loans. However, he highlighted the opportunity to use these assets as collateral to obtain loans, which are considered part of one’s net worth. This approach unlocks various opportunities, such as temporarily shifting crypto holdings into a bank account to secure better loan terms. Significantly, he noted a strong likelihood of many individuals having a significant portion of their wealth tied up in crypto assets.
Ensuring Asset Quality in Fathom Protocol’s Vault System
Genfinity wanted to know more about the process of vetting real-world assets that are deposited into the vault in exchange for stablecoins or a portion of the fund. Therefore, we sought clarification on how Fathom Protocol ensures the quality and legitimacy of the real-world assets being deposited.
The Founder emphasized Fathom’s commitment to sourcing high-quality assets, targeting those that typically boast a triple B+ rating or higher in traditional markets. They’re commencing cautiously, focusing on low-risk assets like gold, treasuries, and various fixed-income products, with plans to expand into equities and large index funds as they progress.
Additionally, Tyler delved into the vault strategy, highlighting its dual approach. Firstly, it can invest in off-chain assets, issuing share tokens to create instant derivatives for assets not yet tokenized on-chain. Secondly, vaults can invest in on-chain tokenized assets, representing the ultimate objective. Tyler emphasized the importance of collaborating with licensed or regulated asset managers for off-chain asset management, ensuring robust oversight. Essentially, their approach is not centered on minting synthetics but rather on creating share tokens rooted in genuine assets.
Tyler’s Insights on the Inevitable Transition to Blockchain in Traditional Finance
There are many potential reasons why traditional financial institutions, especially within the banking sector, could be hesitant to adopt on-chain liquidity leveraging despite regulatory clarity and advancements in compliance measures. Ultimately, we were curious about Tyler’s opinion regarding any viable reasons why these institutions might opt against transitioning onto blockchain networks once regulatory and technical uncertainties are resolved.
Tyler expressed his belief in the inevitable transition of traditional financial institutions onto blockchain networks. He illustrated his point with anecdotal examples, emphasizing the need for DeFi to address retail concerns before full institutional integration. He envisions a hybrid system where DeFi tools could cater to both retail and institutional needs, potentially through private subnets and digital identities to safeguard institutional trading activities.
Notably, he highlighted cost savings as a driving force behind this transition, citing a project at Securrency where automating just one business line resulted in estimated annual savings of a billion dollars for a bank. Tyler emphasized the scalability of such savings across all institutions, making the transition to blockchain technology ultimately unavoidable. He acknowledged that the journey might be gradual but believed that the process had already commenced, marking the beginning of a significant transformation in the financial landscape.
“When you have pricing that’s on chain and feeding automated asset management protocols, things like this that institutions use, you’re talking about tens of billions of cost savings annually across all institutions, probably quite a bit more than that.”
Unlocking Real-World Asset Tokenization: Insights into XDC’s Evolution
We inquired about the evolution of real-world asset tokenization within the XDC network, highlighting recent developments such as the tokenization of treasuries and securities through platforms like YieldTeq, as well as initiatives like SBI, XDC, and APAC aspects in collaboration with Securitize. We sought insights into the current state of real-world adoption within these ecosystems.
Reflecting on the concept of news-driven narratives and their impact on market prices, Carter likened the process to a bell curve. He mentioned that the market had been relatively flat for the past few years but is now beginning to gain momentum. This shift means that impactful news will cycle through more quickly, driven by the increasing volume of information and participants within each blockchain network.
The XDC Network
Focusing on XDC, he highlighted the significance of the network becoming an option on Securitize, describing it as a monumental achievement. XDC now stands alongside other major chains available for tokenization on Securitize, one of the foremost platforms for tokenized assets. This inclusion is seen as a strategic advantage for XDC, particularly as Securitize is a leading producer of tokenized inventory.
Carter also elaborated on the utility that XDC aims to provide through decentralized finance. The objective is to attract users who engage with major inventory producers by offering unique utilities. For instance, when users explore their options on Securitize, they might initially be more familiar with other blockchains like Avalanche. However, upon discovering the functionalities available on the XDC Network — such as using assets as collateral, accessing liquidity via stablecoins, and investing in vaults — they may find compelling reasons to choose XDC. Fathom is an integral part of this ecosystem, designed to build and enhance these utilities on the XDC Network. This pioneering approach makes XDC a highly attractive option for users.
In summary, Carter believes that being listed on Securitize is a significant victory for the XDC chain. He acknowledged that while Securitize is not the only major inventory producer, it is among the top few globally. He predicted that as more inventory producers emerge, different blockchain networks will find their niches, with certain producers dominating in specific geographical regions. This natural progression will continue to drive the expansion and utility of networks like XDC.
Major Financial Institutions
The Founder also noted that major financial institutions, including custodian banks like State Street and Bank of New York, were early adopters of cryptocurrency. This early adoption was driven by the significant potential of instant peer-to-peer payments, which eliminate the multi-day delays typically associated with traditional banking transactions.
The ability to settle assets instantly poses a direct threat to the core business models of some of the world’s largest banks. Recognizing this early on, these banks were fortunate to have forward-thinking leaders who swiftly embraced the emerging technology. Similarly, he pointed out that the DTCC is now exploring blockchain solutions for the same reason.
Furthermore, Carter emphasized that the tools being developed in the blockchain space have the potential to render many incumbents irrelevant — unless these incumbents adopt the new technologies themselves. He suggested that we are witnessing the early stages of this transformative process. This brought him back to his central point about the purpose of decentralized finance. According to Carter, DeFi aims to create valuable changes for retail investors and the broader community, changes that will eventually be integrated into institutional platforms. These platforms, in many ways, are beginning to mirror the innovations introduced by the crypto world.
Empowering Ordinary People: Education and the User Experience
Tyler underscored the critical role of education in advancing blockchain technology and DeFi. Drawing from his experience with S&P, he recounted how he had to persuade C-suite leaders that the technological revolution they spearheaded with ETFs would similarly transform their industry through tokenization, should they fail to adopt it.
Education is indispensable, especially considering that DeFi, in its current form, is challenging to navigate by Web 2.0 standards. To address this, he mentioned several initiatives aimed at improving user experience, including the integration of artificial intelligence (AI). Recently, Fathom hired their first Head of AI, an expert supported by a veteran advisor with 35 years in the field, and joined the Web3 AI Accelerator program.
Not only can AI improve capital efficiency and liquidation mechanics, but it can also simplify user interactions. For instance, AI-driven guided prompts could assist users in executing complex trading strategies, or AI could manage these strategies within a vault, allowing users to deposit their assets without worrying about the intricacies.
The User Experience
Quincy Jones, a Solidity developer with the XDC Foundation, emphasized the importance of user experience in the crypto space, noting that a high barrier to entry has long been a significant hurdle. This barrier stems not only from the complexity of the technology but also from the lack of seamless interaction users are accustomed to, such as logging in with Google or Apple accounts.
Jones pointed out that even with increased education, the ease of use is still not comparable to mainstream applications. He believes that achieving this level of accessibility is crucial for widespread adoption. As more comprehensive products are developed on top of existing protocols — whether layer-ones, layer-twos, or oracles — the user experience will become more intuitive and user-friendly.
He drew a parallel to the early days of the internet, which was once considered a domain for tech enthusiasts. The advent of smartphones also made the internet accessible to the average person, leading to its ubiquitous presence in daily life. Jones sees similar potential in crypto and blockchain technologies. Essentially, innovations enhancing user experience will pave the way for these technologies to be widely adopted, much like how smartphones revolutionized internet usage.
Fathom Protocol
Tyler Carter shared exciting developments and future plans, hinting that the best is yet to come. While he couldn’t reveal specific details about upcoming partnerships, he assured us that significant projects are in the works. The aim is to align with inventory producers globally, making XDC Network one of the first options for providing utility for their assets.
He highlighted a recent milestone: reaching $3 million in FXD stablecoin issuance, a significant achievement. The all-time high total value locked (TVL) was $7.5 million, impressive for a new project within the XDC network. Carter also mentioned a new partnership with Kima Network, a cross-chain liquidity layer. This partnership enhances liquidity by providing up to $10 of liquidity for every dollar on the chain, moving assets seamlessly across chains.
All modules, including vaults, CDPs (Collateralized Debt Positions), the DEX, and borrowing and lending features, are now live. Another exciting development is the onboarding of ComTech Gold, which was approved by a DAO vote. This tokenized gold product will soon be accessible via the CDP.
Looking back, he reflected on the early days when they ran ten different trade finance liquidity pools with FXD. Users could deposit FXD into these pools, which financed trade deals, and earn returns as liquidity providers. The plan is to onboard more companies to vaults, allowing for returns based on trade receivables. For example, a vault sponsored by Trade Flow Capital could offer a set percentage return. Moreover, he emphasized the future potential of vaults, predicting more will spring up, including gold and trade finance vaults. There are also plans to develop multi-asset vaults, similar to structured products, providing even more options and benefits for users.
The XDC Network
Lance Lilly
Lance reflected on recent achievements, notably with Securitize and USTY, which garnered significant attention for the XDC network. These developments not only signified real-world adoption but also highlighted the ongoing efforts of teams building on the XDC network, particularly in the realm of trade finance. Lance anticipated that such initiatives would gain traction as more people entered the industry.
Additionally, he expressed enthusiasm for the impending network upgrade. Although discussions about version 2.0 had been ongoing for some time, the completion of the audit marked a significant milestone. The protocol team was currently working through the final stages, signaling that version 2.0 was imminent. Lance eagerly anticipated the forthcoming upgrade and its potential impact on the network.
He also addressed the practical applications of tokens, emphasizing the importance of enabling individuals to leverage them effectively. He noted the efforts of various teams on the network, including Fathom, to ensure broader accessibility beyond financial institutions. Furthermore, highlighting the necessity for empowerment, Lance stressed the significance of initiatives like Fathom in democratizing access to technology. He expressed optimism about the progress in trade finance, with more projects emerging to involve SMEs and individuals in the sector. Overall, Lance found these developments exciting, noting an accelerated pace of progress within the ecosystem.
Quincy Jones
Quincy expressed his excitement for upcoming developments, particularly in tokenization and subnets within the XDC ecosystem. He believes that subnets will introduce a new array of tokenization services and technologies, which have the potential to be transformative. Additionally, he elaborated on the pivotal role of subnets, foreseeing them as a gateway for institutions to transition from Web2 environments to embracing Web3. He anticipated that institutions would initially deploy their contracts in private or subnet environments before venturing onto main chains. Notably, subnets will serve as a crucial intermediary layer, facilitating the adoption and integration of blockchain technology.
He additionally noted that while some may assume a straightforward adoption of blockchain technology, there are complexities involved in transitioning services onto the chain. Subnets, in this context, provide a middle ground where institutions can familiarize themselves with EVM technology and the blockchain stack in a private setting. This allows them to delve into tokenization and contract management before transitioning their applications and tokens onto the main net environment.
In essence, Quincy highlighted subnets as an essential component in the evolution towards widespread tokenization, offering institutions a gradual and secure pathway into the Web3 landscape.
In closing
Tyler emphasized the evolution of tokenization, noting its historical presence without fully realizing its promises. However, he expressed excitement for the current moment, highlighting initiatives like Fathom and the efforts of inventory producers to create securities tokens compatible with Web3.
Tyler believed that this juncture marked the first utility moment for tokenized real-world assets, making it an exceptionally thrilling time to be involved. He asserted his belief that this could be the tipping point for widespread adoption. Looking ahead, Tyler envisioned leveraging DeFi to bring tokenized real-world assets to existing market users and volumes, with protocols like Fathom providing utility.
He anticipated this transition occurring within weeks to months, especially once the first movers demonstrated success, catalyzing broader industry adoption. Tyler’s optimism and anticipation at the close of our interview underscored the transformative potential of these developments within the crypto landscape.
Looking ahead, Carter envisions adjustments as they onboard assets like gold and treasuries, each carrying unique risk profiles that could align more closely with a one-to-one ratio. He mused on the prospect of established asset managers providing guarantees, potentially leading to precisely one-to-one or even inversely under-collateralized scenarios. The evolving landscape, characterized by players like BlackRock, suggested a future where collateralization models may undergo significant transformation, a narrative Tyler seemed eager to observe and shape.
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