The Infinity Exchange, founded by ex-Morgan Stanley Kevin Lepecoe, is designed to disrupt the crypto fixed income markets.
The company is introducing the concept of a floating interest rate that applies to both lending and borrowing at zero cost. It also plans to introduce the first full yield curve in DeFi with floating and fixed rates, allowing traders to hedge their basis/interest rate risk and speculate over the full length of the maturity curve.
Infinity Exchange has launched the testnet - the Minimum Viable Project (MVP) - of its Institutional Fixed Income protocol aimed at traders, yield hunters and real money investors.
The London-based DeFi protocol uses a hybrid structure built on the Ethereum blockchain that performs calculations and risk management outside the blockchain.
It is headed by founder Kevin Lepsoe, former head of structuring at Morgan Stanley in Hong Kong. There, he led a team of structurers, quants and traders who worked with funds, financial institutions and governments. His career also includes senior roles in credit derivatives and foreign exchange at Barclays and ING Barings, based in Hong Kong and Singapore.
Prior to founding Infinity Exchange in June 2022, Lepsoe built two other startups: Notey and Chinafy. Now he aims to make his new venture, Infinity Exchange, the fundamental price and risk protocol for DeFi's stability and growth.
Infinity Exchange aims to bring TradFi's institutional interest rate market and risk management mechanisms to the DeFi markets for the first time. This would be a milestone for the ecosystem, because until now, the builders of the first protocols focused on generating broad interest within a retail-like credit environment and built "DeFi 1.0" on an unstable foundation with fundamental flaws, the company said.
Crypto bond markets should be 100 times larger than they are today
Kevin Lepsoe, founder of Infinity Exchange, commented, "Crypto bond markets should be 100 times the size they are today and we are taking the first two steps in that direction. We are introducing an institutional-grade interest rate protocol that aligns with financial theory while taking a comprehensive approach to risk management."
"In TradFi, institutional investors are more active in fixed income markets than in equity markets. If we want more institutional investors to invest in cryptocurrencies, we need to capture the fixed income markets first, and that starts here, at Infinity."
Infinity Exchange aims to bring the industry into the new world of "DeFi 2.0" by developing a protocol that uses the same mechanisms and achieves the same efficiencies as the TradFi markets and, in particular, the interbank lending market.
The company is introducing the concept of a floating rate, with a zero bid for both lending and borrowing. It also plans to introduce the first full yield curve in DeFi with floating and fixed rates, allowing traders to hedge their basis/interest rate risk and speculate over the full length of the maturity curve.
Infinity believes that by expanding the range of investable assets along the yield curve, volatility should decrease and DeFi markets in general should become more stable.
The Exchange will allow for the management of a range of complex collateral for which there is currently no place to generate yield, enhancing the opportunities for interest rate arbitrage between other credit protocols and Infinity.
The fixed-rate cryptocurrency platform will also provide leverage to investors holding more than $20 billion in TVL, which is currently sitting idle at Aave, Compound, Uniswap, and Curve.