The seamless integration of traditional finance with DeFi (decentralized finance) holds the potential to revolutionize the financial sector by combining established financial systems with innovative solutions and unparalleled liquidity. However, the pace of this fusion has been somewhat slower than initially anticipated.
Increasingly, traditional finance is attracted to DeFi’s frictionless market, innovative tools, and investment strategies. But, up to now, institutions have remained undecided on where to build, in part because the technology hasn’t delivered the modularity, customization, and compliance vital to their core activities.
That’s set to change—meet Tradable.xyz, a high-profile joint venture between Victory Park Capital, a leading private credit fund with $9 billion in originations, and Spring Labs, a blockchain and data security company. This is the latest high-profile project to operate as a hyperchain using the ZK Stack, which can connect to every dapp running in the zkSync ecosystem, including sovereign hyperchains via hyperbridges.
The move holds clear advantages for Tradable, a provider of institutional-grade private credit exposure, operating within a strictly regulated sector. ZK Stack enables the creation of bespoke blockchains with personalized privacy controls, data management, and transactional protocols, all while leveraging the extensive liquidity and robust security of the Ethereum ecosystem.
Private Credit: “The Hot New Thing on Wall Street”
In volatile public market conditions, the popularity of private credit has demonstrated that borrowers increasingly value certainty, privacy, customization, and speed of execution.
As an asset class, private credit is characterized by resilience and attractive returns, combined with limited volatility—leading it to be dubbed “the hot new thing on Wall Street.” The sector has grown six-fold since 2008, with $1.4 trillion dollars in private assets under management.
Today, private credit is evolving in a way that mirrors the technological expansion in private equity markets. Advances in diversification parameters have enabled increased fund sizes to finance larger deals and innovative approaches to meet borrowers’ needs. That’s reflected in a surge in private credit activity in DeFi, with more than $4.4 billion in total issued loans since 2021, and an active loan portfolio exceeding $500 million.
Tradable aims to be at the forefront of the private credit evolution and to accommodate other alternative assets, such as asset-backed securities. The platform enables investor-lender collaboration in syndicated opportunities, altering the traditional approach to distributing deals and widening market participation. Tradable’s mission is to expand access to institutional-grade deals via an accessible marketplace. This will be underpinned by a blockchain purpose-built for institutional DeFi, thanks to the modular nature of ZK Stack, and the privacy and security afforded by zero-knowledge technology.
Unlocking Access to Private Credit with Tradable's Onchain Solution
"Private credit generates some of the best risk-adjusted returns in the market, yet few investors can access deal opportunities in this asset class,” Tradable founder Johnny Reinsch said earlier this year when the startup announced two new partnerships and $500 million of annual supply-side flow already contracted.
Essentially, Tradable’s web-based software platform digitizes private credit deal ownership interests and offers AI-powered data access, document signing, investor management, and monitoring.
The platform acts as the ownership ledger, streamlining syndications, and reducing the costs and barriers typically associated with private credit transactions, thus lowering the barrier to entry. But its long-term goal is to make private credit tradable.
Support and commitments from investors means that Tradable is on track to rapidly become the largest onchain platform in the private credit market. By utilizing zkSync's technology, Tradable boosts platform efficiency and scalability while ensuring the privacy and compliance that institutional investors need.
Initially, Tradable will oversee rule-setting, permissions, and fee structures, laying the foundation for a stable and well-regulated platform. As the ecosystem matures, a broader network of participants will take over the reins, ensuring a future guided by collective governance and principles that are aligned with the ZK Credo, a declaration of the foundational principles for zero knowledge technology and values to reshape the internet.
https://github.com/zksync/credo
Leveraging ZK Stack to Tokenize the $1.4 Trillion Dollar Private Credit Market
By lowering entry barriers and offering a slice of this asset class to a broader investor base, Tradable’s use of zkSync is laying key infrastructure for mass Web3 adoption, with the most robust and future-proof tech stack featuring best-in-class security.
Hyperchains are the avant-garde of blockchain technology. With an architecture that ensures scalability and cost-free transfer of assets within the network through dedicated hyperbridges, hyperchains offer a seamless, low-latency experience and a shared liquidity pool for users.
Zero-knowledge technology is the only viable way to scale blockchain like the internet; ZK Stack’s privacy properties and modularity make it an excellent choice for highly regulated and compliant industries. Traditional financial institutions that value rigor and security can be assured of operating on a fully compliant, regulatory, and institutional-friendly chain run by Tradable and other compliance-forward dapps.
The technology not only enhances transparency while maintaining privacy, but also boosts efficiency and interoperability, granting access to innovative financial instruments and enabling diverse investment strategies. Crucially, it ensures liquidity for typically static private credit markets.
As Tradable gears up to build with ZK Stack, the implications for institutional-grade yield are substantial. With an operational hyperchain targeted for the latter half of 2024, we're a step closer to more transparent and accessible financial markets.
Beginning Your ZK Journey with ZK Stack
If you're an enterprise eager to join our mission, visit the new ZK Stack resource page at https://zkstack.io or get in touch via email at [email protected].