By Michael Scott
The crypto exchange platform Figure Markets harbors a visionary post-FTX disruption as it looks into the trading and custody arena. The crypto exchange integrates the alternative trading system with cross-collateralizing traditional and digital assets.
Figure Markets chief executive Mike Cagney considers that MPC wallets deliver the fully on-chain book ideal for a decentralized exchange.
Figure targets to tap $100M from the balance sheet to catalyze and stimulate borrowing and lending.
Figure Markets Taps Alternative Trading and Multiparty Computation
Figure Markets is the brainchild of experienced entrepreneur Mike Cagney and mirrors a post-FTX trading-and-custody platform targeting institutions.
In-depth scrutiny reveals that Figure Markets harbors value propositions in cost-saving practices besides its visionary disruption.
The primary components of Figure Markets involve the broker-dealer license alongside the alternative trading system (ATS).
Also, Figure Markets features the capacity to cross-collateralize real-world assets (RWA) with crypto. It plans to tap the balance sheet of Figure Technologies as the catalyst to facilitate borrowing and lending.
The presence of the above elements is underpinned by the multiparty computation (MPC) wallets. The Figure Markets taps the largely decentralized order book and the support of market maker specialist Jump Trading.
Future Markets meets the desired attributes for a post-FTX collapse. The need to build the exchange arose from the sister firm Figure Technologies’ experience tokenizing non-crypto assets. Today, the firm has tokenized assets surpassing $30 billion in value since 2018. The firm utilizes the Cosmos-based Provenance Blockchain.
Cagney admitted that previous experimental efforts to create an on-chain market to handle private company shares and Figure stock trading using the ATS hardly garnered the desired traction. Attempts to onboard the heavy hitters, such as Apollo, that were targeting to stimulate trading on-chain fund interests, turned futile.
Figure Markets to Refocus on Market Structure
Cagney resents the learning curve, particularly for the business models that have recently become popular in blockchain. He considers such proved unviable.
Cagney illustrated that the team settled on tapping opportunities emerging in the market structure. The standout is that Binance mirrors Coinbase’s functioning, which is also witnessed in FTX. The leading crypto exchanges still execute custodians and clearing agents even after FTX collapsed in November 2022.
Cagney illustrates that the appropriate direction was leveraging the MPC founded upon the Silo offering by Jump Crypto. It represents the security-perfect interest in itself analogous to self-custody through delivering the decentralized exchange concept.
Cagney’s version differs from the decentralized exchange (DEX), which leverages decentralized finance (DeFi). The DEX features anonymous parties trading via the anonymous market maker (AMM).
Figure Markets deploys a limit order book that almost mirrors the on-chin experience since it technologically accommodates the possibility of deploying at scale. Cagney rules out that Figure Markets will scale to levels that rival Coinbase and Binance.
Cagney explains that bringing order involves matching the construct off-chain to allow one to write back to the chain after five seconds. The five seconds allow one to utilize a centralized construct of the orders. Still, one is not assuming possession of the underlying collateral.
Figure Markets Inculcating Decentralization
Cagney views AMMs as inappropriate for consumers since they are continually exploited by the market makers that often execute sandwich attacks on retail clients. The real solution lies in striking a suitable blockchain computation. The absence thereof compels running the off-chain matching to realize the throughput desired. Such is not disingenuous to the decentralization concept.
Market makers led by Jump consider a high value in the Figure Market’s decentralization blend with the cross-collateralization. Nevertheless, they still flagged liquidity challenges necessary for borrowing and lending. They illustrated that such hinders access to capital when either lending or borrowing.
The industry is ripe to consume a billion-dollar capital daily. Dealing with the challenge prompted apportioning $100m drawn from the Figure Technologies balance sheet to turn the lending flywheel.
The approach democratizes prime finance by eliminating the need to introduce brokers. Instead, Cagney illustrates that one should just attach the wallet to start exchanging and trading.
Cagney observes that one is responsible for reshaping how financial markets operate creatively yet massively disruptively for the ecosystem.