Andre Cronje, the developer of DeFi, has announced Fixed Forex, a new decentralized stablecoin exchange mechanism.
In a Friday blog post, Andre Cronje revealed the idea, dubbed Fixed Forex. It allows users to create and exchange fiat-pegged stablecoins such as the US Dollar (USD), Euro (EUR), South African Rand (ZAR), Japanese Yen (JPY), Renminbi (CNY), and other fiat-pegged stablecoins.
Andre Cronje is primarily known for creating Yearn Finance, Keep3r Network, and multichain, among other noteworthy DeFi projects. In his statement, xyz described his new venture in detail. He described how users can create fiat-pegged stablecoins and trade them for other Ethereum assets.
To manufacture stablecoins through the protocol, users will need to offer collateral in the form of other crypto assets.
The protocol will calculate Loan-to-Value (LTV) ratios and take collateral dynamically to mint fiat-based currencies, similar to lending protocols like Compound, Aave, and Cream Finance’s Iron Bank.
Cronje pointed out that the quantity of collateral that can be used to issue coins is proportionate to the amount of on-chain liquidity accessible on Fixed Forex.
In addition, unlike decentralized stablecoin issuers, Fixed Forex has implemented “gentle liquidations,” a system that assures that a user’s collateral is not totally liquidated during a market slump.
Instead, to settle the obligation and preserve the collateralization ratio, the protocol will only liquidate a small quantity of cash.
Since the Fixed Forex contract is currently unaudited, adding cash other than for test purposes is dangerous. According to Cronje, the project’s final version will be built on top of Curve Finance.
The value of the foreign exchange market is currently estimated to be $6.6 trillion. Despite its enormous size and popularity in traditional markets, currency has stayed mostly outside of Ethereum’s thriving DeFi ecosystem.
This could be due to the complicated dynamics of FX markets and Ethereum’s long transaction times and expensive fees.
Fixed FX, if successful, could be one of the first initiatives to successfully execute a large-scale decentralized forex exchange on Ethereum.