TORONTO – Tokens.com Corp. (NEO: COIN) (FSE: 76M) (“Tokens.com” or the “Company”), a Blockchain technology company that provides transaction processing and validation services for various digital assets that power Decentralized Finance (DeFi) applications and Non-Fungible Token (NFT) platforms, is pleased to share Part II of its letters to shareholders series regarding the Company’s business model, particularly as it relates to the blockchains that are powering opportunities in the next generation of finance.
As part of our ongoing series from management, we’re pleased to share Part II today on the opportunity to support the next generation of finance through staking and the role played by Tokens.com. Please refer to our website to revisit past letters, including the first of this series published last week on our near zero energy consumption business model.
DeFi is the Most Exciting Thing Happening in Finance and in Blockchain
Decentralized Finance or DeFi, refers to digital platforms that allow consumers to perform financial transactions with each other without the use of banks. This is accomplished using blockchain technology. The most popular DeFi uses are lending, borrowing and trading. The sector is currently booming with over $80 billion(1) locked in DeFi applications and, as of the end of Q1 2021, there were 1.75 million estimated users(2).
The advantages of using DeFi instead of traditional banks are numerous, including it being more reliable, less costly and faster than outdated banking platforms. For example, if you have ever sent money abroad via the SWIFT system that banks belong to, you are aware that it is slow and expensive. Banks dominate the borrowing and lending of capital. They charge high fees to borrow and pay near zero interest on deposits. DeFi solves these issues.
The deposit rates in DeFi are far higher than what is offered at a bank, typically reaching 8% or higher. Individuals can also borrow off these platforms instantaneously by using crypto assets as collateral. The volume and user numbers continue to grow at an astonishing pace every month as new consumer finance applications are brought to market.
What role does Tokens.com play and why?
The most popular DeFi platforms, such as Aave and Uniswap, are built on the Ethereum blockchain and require ETH, Ethereum’s digital asset, to operate. Ethereum is programmable and ideal for operating robust, next-generation apps that require high throughput like DeFi, which trades billions of dollars daily. It is this functionality that makes highly-programmable blockchains like Ethereum not only popular – but also valuable.
Blockchains like Etherum require third parties, like Tokens.com, to validate its transactions. As such, each time a DeFi transaction occurs on Ethereum, the DeFi application pays fees to the Ethereum network, which then pays fees to transaction processors, like Tokens.com. Ethereum is currently a Proof-of-Work Blockchain (where miners validate transactions) – but is in the process of migrating to Proof-of-Stake (where staking firms like Tokens.com validate transactions).
DeFi platforms are consumer-facing financial interfaces that require blockchain technology and Crypto Stakers (the transaction processors) to operate. The blockchains act like digital highways allowing DeFi transactions to move. Crypto Stakers, like us, are the toll booths that ensure the transactions are safe and then let them proceed. Tokens.com’s service is unseen at the consumer level, but our service is the necessary infrastructure that allows transactions to occur. DeFi applications, the blockchain highway and the Crypto Stakers are intertwined and each one integral to how blockchain technology functions. This is essential to how Tokens.com generates its revenue and selects the blockchains it stakes.
How we choose which Blockchains To Stake
We have conviction that DeFi will become a trillion dollar market. Tokens.com looks at which DeFi applications are most widely used and which blockchains they are built on. We also conduct thorough due diligence before we stake a blockchain, looking at their staking returns, market cap and sponsorship. While we evaluate dozens of blockchains, we believe that Ethereum 2.0, Polkadot and Binance Coin are widely used and positioned to capitalize on the growing DeFi market.
Simply, we choose to stake blockchains that are linked to fast-growing sectors, like DeFi. DeFi is recreating the entire financial system. That’s where we see a high volume of transactions that need our services. The more transactions we process, the more revenue we earn.
We feel that despite the current volatility, the digital assets we are staking are linked to long-term growth sectors and will show greater resilience. We believe it’s not about timing the market. It’s about time in the market. Our staking assets, like Ethereum 2.0, are shaping the future of finance, which is why we think they’ll also provide outsized staking returns and appreciation for our investors.
Tokens is a Blockchain technology company that provides transaction processing and validation services for various digital assets that power Decentralized Finance (DeFi) applications and Non-Fungible Token (NFT) platforms. Tokens utilizes Proof-of-Stake (“PoS”) or Staking technology. DeFi is a new class of financial applications that provides users with automated and transparent financial services, such as borrowing and lending, without the need for financial institutions. NFTs are redefining how art, gaming, music and collectibles are created, valued and traded. Management believes that as mainstream adoption for DeFi and NFT applications grow, the need for Tokens.com’s Staking services will commensurately increase.
Tokens has agreements with industry leaders, Polychain Labs, Bison Trails, Staked and Coinbase Custody, to manage its staking operations and provide custodial services. Tokens’ management team includes seasoned blockchain and financial professionals with prior experience at Hut 8 Mining, Fidelity Investments, Galaxy Digital and Goldman Sachs. Tokens was formed in collaboration with Polychain Labs, an affiliate of Polychain Capital, which is one of the largest cryptocurrency venture capital firms in Silicon Valley. Current investors include Bitbuy Limited, First Block Capital, HIVE Blockchain Technologies Ltd., PowerOne Capital Group, Matthew Roszak (the co-founder and Chairman of Bloq, Inc.), and Olaf Carlson-Wee (the founder and CEO of Polychain Capital).
The Company’s common shares are listed under the symbol “COIN” on the NEO Exchange and as “76M” on the Frankfurt Stock Exchange.
Further information can be found on the Company’s website: Tokens.com.