GEM DIGGERS AMA with ONOMY PROTOCOL
Flash quiz…What would you say is the single largest trading market on the planet? Don’t cheat and google it, just have a guess. Is it stocks, bonds, commodities like gold, silver, sugar or is it cryptocurrencies or physical assets?
Well it’s none of the above, the answer is MONEY, the trading of all global currencies, specifically we are talking about the FOREX. With a trading volume of around $6.6 Trillion per day!!! it is the single largest trading market on the planet today. Compared to other markets it is relatively young, around 100 years old. Like crypto, this market is always open and essentially it’s decentralised. Who trades it…anyone and everyone from individuals to corporations to massive investment funds.
So why is it beneficial to bridge the world of FOREX into blockchain and decentralised finance (DeFi)? At Onomy Protocol they have the answer, the vision and the product to go with it. They are creating a self-governed monetary system that provides stability in what is normally a highly volatile FOREX environment.
The volatility that FOREX has today inherently gives rise to settlement risks, at any point in time there is a potential risk of settlement failure for payments to the tune of $8.9 Trillion per day, this is caused by market events that can disrupt and fragment the flow of currency exchange, having significant knock-on impacts in the financial world.
Here’s an example:
In 1974, the bankruptcy of Bankhaus Herstatt, a German bank active in FX markets, demonstrated how FX settlement risk can undermine financial stability. At 15:30 CET on June 26, 1974, the German authorities closed the bank down. While Herstatt had already received Deutsche marks from its counterparties, it had not yet made the corresponding US dollar payments in New York. Herstatt’s failure to pay led banks to generally stop outgoing payments until they were sure their countervalues had been received. The international payment system then froze, and the erosion of trust caused lending rates to spike and credit to be curtailed. Settlement risk continues to be a significant risk and has increased in both relative and absolute terms since 2013 (Bech & Holden, 2019). — Source, Onomy Whitepaper
Now… you could have a read of Onomy Protocol’s very comprehensive and insightful whitepaper here to learn more. However why not take a look at the full roundup of a recent AMA that was hosted by Ozzy from Gem Diggers with Lalo Bazzi, CEO and Founder of Onomy and Daniel Dob, Chief Marketing Officer.
Here it is…
Ozzy: Let’s start by learning more about you and your core team, can you tell us about their experience in the blockchain space and what brought you together to create Onomy?
Lalo: Hello everyone! I formerly worked at Fidelity Investments and Microsoft. My co-founder and CTO Charles Dusek has led multiple large-scale projects within the energy finance industry and has worked with decentralized, encryption and BFT technologies since 2017.
While I was passionate about all things crypto for years, I went full-time into the blockchain industry in 2018, building ASIC mining hardware for bitcoin. The bear market quickly came, so our team transitioned to a decentralized cloud in which we built many great technologies such as a private key management suite we named “Natural Rights.” Our experience has led us to observe a series of DeFi problems that needed solving, mainly the scalability and interoperability challenges that decentralized exchanges were facing. It is our belief that the future of crypto and DeFi is cross-chain. In this sense, Onomy’s purpose is to build a powerful layer-1 blockchain network, as well as an exchange that can converge the forex and DeFi markets, featuring cross-chain stablecoin liquidity aggregation and many other benefits.
The team currently has 12 members, all of whom hold deep experience in finance, cryptocurrencies, and blockchain development. We’re lucky enough to be rapidly expanding!
Ozzy: How long have you been developing Onomy for, are you on track for launch later this year?
Lalo: Onomy is a collective of technologies including our own developments we have worked on over the past 3 years. The technologies fit into enhancing the user experience for a cross-chain world extremely well, and specifically enabling the $6.6T forex market to plug into DeFi.
We’ve made great progress over the last couple of months, both in terms of building the ecosystem, but also in securing the needed financing via the oversubscribed private rounds. We strive to fulfil every goal laid out in our road map, and to that end, the Onomy Protocol ecosystem will have initial versions of our core products launched over the next year.
Our high-level goals for 2021 include finalizing the Bonding Curve Sale, launching the validator, staking & delegation programs, followed by the wallet & portfolio dashboard, Onomy Reserve, Onomy Exchange, CEX listing, oUSD stablecoin, Denom (stablecoin) minting interface for major currencies, the Single Sign On we’ve revealed, and at a later-stage, adding Denom staking, Denom pairs, and additional liquidity rewards.
Ozzy: What are the ‘real-world’ problems that Onomy seeks to address and how? Why do we need FOREX on blockchain?
Lalo: Speaking generally, decentralized finance gives anybody the opportunity to participate meaningfully in yield opportunities and beneficial financial products while commanding complete control and ownership of their assets. This level of accessibility is a step-above what traditional finance can offer.
Onomy’s mission is to bridge traditional and decentralized finance, providing secure and non-custodial capital management and access to various yield opportunities once only reserved for institutions.
For example, Onomy and our partners will provide a fiat onramp to convert your money to the synthetic version of the same currency. The stablecoin created can then access DeFi products to earn yield far exceeding the standard 0.01% interest paid to savings accounts at banks. Users may then use the fiat offramp to withdraw funds back to their bank. For more advanced users, the Stablecoins (called Denoms in our ecosystem) can be transferred cross-chain and provided to various future liquidity pools via our Bridge Hub.
In addition to the Forex market, the Onomy Bridge Hub gives access to crypto liquidity and cross-chain markets, thereby aggregating the crypto world for the traditional finance industry. In other words, native crypto assets can use the same bridge infrastructure as our Stablecoins and be aggregated for users to exchange with. Furthermore, any chain Onomy is bridged with can bridge with any other bridge chain, such as Ethereum-native asset bridging & exchanging with Polkadot-native assets.
There’s plenty more to say, such as enhancing user experience — but we’ll leave it at this for now!
Ozzy: Tell us more about the Onomy ‘Natural Rights’ tech, what purpose does it serve?
Daniel: We’ve been expecting this question, and we’re really glad you asked!
Onomy will provide a seamless user experience from the get go, and our Natural Rights technology makes this possible. To keep it simple, Natural Rights provides a Single Sign On wallet to manage multiple private keys on one interface, so there’s no longer a need to use multiple browser extensions or to switch networks continuously. From a technical standpoint, Natural Rights is best described as a private key management protocol that leverages proxy-encryption, considerably improving the user experience.
Ozzy: Onomy uses Stablecoins as a core part of its trading mechanisms, are you looking to expand the types of Stablecoins beyond what is on the market today?
Daniel: So far, the cryptocurrency market has mostly seen USD-pegged Stablecoins, yet there are many other currencies out there with significant potential when deployed onto crypto.
Therefore, we opt to virtualize all of the world’s fiat currencies to enable simple, but effective foreign exchange via the Onomy DEX. After all, it makes perfect sense that users in non-USD regions would prefer keeping part of their capital in their national currency, or why not, in many others too.
Diversifying your fiat portfolio across several currencies is a no-brainer in terms of the risk reducing and profitability benefits, but their virtualization opens up the gates to considerable possibilities. This can especially enhance financial security of those in regions with poorer access to financial products and stable currency.
Ozzy: Would you say Onomy increases or decreases the complexity of trading the FOREX market, what are the reasons for your view?
Daniel: Good question!
Traditional forex trading is a friction-intensive process that’s been demanding simplification for years. In most cases, retail traders have to go through brokers or third parties, which implies the need for trust, as well as sufficient capital to accommodate the centralized costs incurred.
Since the Onomy Protocol is decentralized and non-custodial, users don’t rely on centralized third parties, but rather on a decentralized and trustless ecosystem powered by secure smart contracts. Capital management resides in the users’ hands, whereas the trading interface is designed to facilitate efficient swaps between Denoms (virtualized fiat currencies). In our eyes, Onomy’s core pillars not only simplify forex trading, but revolutionize the market as a whole thanks to the many benefits achieved through the usage of blockchain technology.
Ozzy: What are you doing at Onomy to handle cross-border regulations in FOREX trading?
Daniel: Since Onomy is decentralized, anyone anywhere in the world can theoretically utilise the products and services being offered. Onomy strives to work with regulators, rather than against them. In this sense, Onomy’s founders have a long history with being on the forefront of regulations, including being one of the first to make use of the utility token law in Wyoming, USA.
More so, Onomy’s partners will establish on and off-ramps that handle KYC/AML whenever needed. Due to the nature of Onomy, full responsibility over jurisdictional compliance remains in the users’ hands. Thus, it’s essential for everyone to do their due diligence when deciding whether Onomy is a right fit from a regulatory standpoint.
Protocol decisions are left to the Onomy DAO, meaning that NOM token holders have the power of governance as opposed to a central entity.
Ozzy: With an average of $6.6 trillion traded per day in FOREX, what gives us the confidence about the scalability of Onomy to handle the largest financial market in the world?
Lalo: Excellent question and a topic Onomy has given considerable development time toward. Scalability must allow for enhancement of trading and settlement experiences. Fortunately, blockchain tech is quickly advancing, and solutions that assure high transaction throughputs exist.
Initially, the layer-1 Onomy Network blockchain will run on Cosmos. Cosmos-based infrastructure is able to achieve 100x the efficiency of Ethereum.
Even so, as we become significantly adopted in becoming leading infrastructure for the crypto and forex markets, higher scalability will be needed. To this end, our own Equity consensus protocol will dramatically improve throughput. It utilizes Byzantine Fault Tolerance (BFT). Through a form of machine learning, Equity decides the order through a preferential vote utilizing Borda count without blocks in an asynchronous fashion serializing transactions. Validators determine which transactions have crossed the network first, efficiently ordering them accordingly, and saving time.
In the long run, Onomy’s layer-1 mainnet will scale beyond what’s possible today, providing the much-needed rails for the total blockchain-ization of the forex market and extremely efficient crypto liquidity aggregation.
Ozzy: Can you explain the utility of your token NOM, how will demand for this be created and maintained?
Daniel: $NOM is a core part of what we do, and Onomy wouldn’t be possible without it. $NOM is used as collateral to mint Denoms (virtualized fiat), so anyone who wants to mint their own Stablecoins will need to hold $NOM. Secondly, $NOM is used as part of the proof-of-stake (PoS) model implemented in the Onomy Network blockchain to maintain security and scalability, and so it’s a key part to validator incentives through staking rewards. Additionally, holding $NOM will yield voting power over the ecosystem’s future in governance proposals to the protocols, use of reserve funds, and more.
To be available via a Bonding Curve Offering (BCO), but we’re expecting a question on that :D
Ozzy: Tell us more about your bonding curve offering, what does this do for users of Onomy?
Daniel: Our goal was to create a convenient way for users to get early access to $NOM and have an instant market with liquidity. Our Bonding Curve Offering acts as an automated market maker (AMM) to solve this.
The Onomy Protocol token, $NOM, is primarily distributed through a bonding curve contract deployed on the Ethereum Network that issues wrapped NOM tokens ($wNOM). $wNOM will be exchanged 1:1 with $NOM on the Onomy Network Bridge Hub when the mainnet is launched. $NOM is the functional utility token of the Onomy Network and the token that will be listed on exchanges.
An interface will be provided for this swap when the mainnet is launched, commonly referenced as “bridging” $wNOM tokens from Ethereum and into the Onomy ecosystem for $NOM. When bridged, $wNOM is burned from the bonding curve, pushing prices higher, and $NOM supply is issued in proportion on the Onomy Network.
There will be 100M $wNOM loaded into the AMM. Whenever a user purchases $wNOM from the AMM with $ETH, it will be minted and issued to the purchaser. The price per token increases per token issued until the 100,000,000th token is issued at 1 ETH = 1 NOM. Should a purchaser want to sell their $wNOM, the AMM contract will buy back the $wNOM with $ETH, always having enough $ETH in the reserve to purchase the $wNOM back.
In lieu of Onomy taking the ETH from the AMM that provides the instant market for users, a fee of 1% is applied per trade with the bonding curve for sustainability and funding of Onomy. ETH may only be taken in proportion to the $wNOM that has been bridged and burned from the BCO AMM.
The TL;DR of this is that the BCO provides instant liquidity for users to both buy and sell. A 1% fee is applied per trade. Price per token increases per token issued. Users purchase $wNOM with $ETH, then bridge $wNOM for $NOM upon our mainnet release. $NOM is the functional utility token that provides staking rewards, minting capability of Stablecoins, and governance weight in the Onomy DAO.
That TL;DR at the bottom will surely help some people 😉
Ozzy: Is your contract audited, or in the process, what progress have you made on this front?
Lalo: We understand smart contract risk and make every effort possible to create a safe ecosystem. To this end, our Bonding Curve Offering audit has already been completed by the well-established NCC Group, a UK-based information assurance firm handling high-level cybersecurity audits having over $350M in revenue in 2020 and over 2,000 employees. More so, our other products are well-tested and built via the audited CosmosSDK and Tendermint BFT. None of our upcoming products and bridges will be publicly released without undergoing 3rd party audits — even so, users must conduct their own due diligence when gauging Onomy’s security protocols.
The End…that covers the AMA. The FOREX is a complex environment but what Onomy are striving to do is create a user-friendly platform on a global scale whilst at the same time using the blockchain to de-risk some meaty issues that exist with the current FOREX trading environment.
And the WINNER is!!!!
We had some great question posted by our ever engaged audience. Lalo and Daniel were impressed with the audience participation and tried to answer as many as possible in the time we had. Alas there could only be one winner for the $100 USDT best question prize, here is the winning question and answer.
Winning Question: From @zidan30 partners in each project play a big role as backup and support at the start of each project / company, so my question is what role do your partners play in the ecosystem and what benefits do they have for being partners? and who are your current partners?
Answer from Lalo: We absolutely agree. We have taken our time to select the right partners, vetting for value add and alignment on long-term success of the project. A fundamentally strong team and partners is what will yield success. Our partners range from liquidity providers to the Onomy Ecosystem, advisors with previous significant positions at Goldman Sachs, PwC, Softbank and other finance companies, but also partnerships with top-tier blockchain protocols and more.
We’ll be launching a revamped website very soon displaying some of our major partners and investors. Stay tuned!
To learn more about Onomy Protocol, feel free to use these resources: