If the forex market begins using decentralized financing (DeFi) protocols instead of the current central systems, the expense of remittances could be decreased by “as much as 80%,” according to a Jan. 19 paper collectively released by researchers at Circle and Uniswap.On-chain forex(FX)is a new design of international value exchange that provides a much faster, more affordable, and more effective alternative for cross-border payments.Our current term paper with @circle has everything https://t.co/NGniRo8yrp!.?.!— Uniswap Labs(@Uniswap)January 19, 2023 The paper, titled”On-chain Foreign Exchange and Cross-border Payments,”was composed by Uniswap Data Scientist Austin Adams, Circle Chief Economist Gordon Liao, Mary Catherine Lader, David Puth and Xin Wan.The authors studied the trading activity of Circle’s U.S. Dollar Coin(USDC)and Euro Coin(EUROC)on Uniswap from July 2022 through January. They discovered that the coins had$128 million in total volume, with some days having trading volume as high as$8 million.During this time, the stablecoins USDC and EUROC traded within a few basis points of exchange rates discovered in the wholesale forex market for their support
currencies, USD and EUR. In the authors’view, this revealed that the DeFi forex market was providing an affordable option to traditional forex, with excellent rate effectiveness, despite its smaller sized trading volume.Related: DeFi auditor nets $40,000 for recognizing Uniswap vulnerability However, the researchers wished to know if utilizing DeFi procedures like Uniswap might offer savings to participants in the forex market. So they evaluated the costs associated with the conventional”correspondent banking design “of forex vs. those related to DeFi forex. Correspondent design of forex vs. DeFi model. Source:”On-Chain Foreign Exchange and Cross-Border Payments”by Adams, Ladder, Liao, Puth and Wan They utilized World Bank approximates to figure out the price of a $500 remittance done through the global banking system. They then compared this with the cost of buying stablecoin (either USDC or EUROC )through an exchange, switching it for the other coin on Uniswap, sending it to another individual, and having the other person money it
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