Welcome to Swarm Markets’ media memo. This weekly update provides comments from Swarm Markets’ co-founders, Philipp Pieper and Timo Lehes, on key industry news that has caught our eye, plus our own developments.
Comments available on the following news items:
- Goldman Sachs launches blockchain network
- One in three family offices investing in digital assets
- MakerDAO launches lending protocol
Major institutions including Microsoft and Goldman Sachs launch blockchain network
Canton Network has been launched by a group of firms including Goldman Sachs, Microsoft, Deloitte and Cboe according to reports in Bloomberg. The network purports to link disparate institutional applications together on one blockchain in order to encourage adoption by financial markets.
Overall the success of the Canton remains to be seen. With a venerable list of participants it might be easy to conclude its one to mark as a winner. But broader financial market adoption of blockchain and digital assets is very much about proofing the offering. That is to say, the real demand here is for services that facilitate reliable, regulated and transparent digital asset ownership, custody and transaction.
Major networks are already meeting scale and adoption requirements, but these big institutions seem keen on providing something proprietary instead of subscribing to what is already available. Protocols like Swarm prove that permissionless networks employed with access control built into smart contracts can satisfy compliance requirements.
Major networks such as Ethereum or Polygon work because they’re open access, and those with the right knowhow can use them for myriad use cases and projects. So the idea that Canton Network is somehow creating demand for adoption isn’t especially compelling. Perhaps it would be better to suggest that such a network is looking to encourage adoption on the terms of the institutions behind it.
One in three family offices investing in digital assets
Goldman Sachs’s latest family office investment report suggests family offices are increasing their digital asset holdings.
The research is somewhat mixed as less family offices are now interested in the future of crypto and digital assets, but there is a clear bifurcation between those who won’t ever and those who already are.
Much of the focus of institutional adoption has been on major investment banks and their ilk, but family offices in many cases can be the driving force behind new investment waves. Although the report notes some apprehension from many, it is likely this will improve as understanding of digital assets improves. Key to this is one in five see blockchain technology, rather than the investment case of crypto assets, as the most important aspect of their investment.
What is also key is the contribution that digital real world assets (RWAs) will play in bridging the gap for these organizations. Many will be rightly wary of crypto tokens – but if you can create pottfolios of digitized shares and bonds without worrying about trading hours or settlement times, then the facility of such an innovation to ownership is easy to see.
MakerDAO lending protocol pieces together real world asset (RWA) puzzle
MakerDAO has launched a new lending protocol called Spark, piecing together a significant piece of the DeFi puzzle with demand for digital RWA-backed stablecoins and other assets soaring.
RWAs have made up a significant portion of profitability for the protocol and present a game changing opportunity to the market, which is calling for quality assets on chain with a tangible backing. RWA engagement on MakerDAO in light of the crypto volatility has been 15x of the amount of RWA debt assets on the protocol since Q2 last year, and has been securing a 3x in protocol revenue.
Presenting yield-bearing collateral on chain to investors, using RWAs such as T-bills is having a clear impact on demand. It’s no surprise MakerDAO has launched a new lending protocol to build on this.
They’re also not the only ones engaging in a flight to quality for on-chain collateral. Tether released their Q1 2023 assurance report, revealing direct US T-bill holdings of over $53bn, representing more than 64% of total reserves.
Ultimately what matters to the sector is providing solutions that investors want, and being about to do that profitably. RWAs are clearly now opening a path to that profitability and a move away from the troubling volatility and uncertainty of the past.
