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For a brief overview please read our Litepaper One-pager and to access our dapp please visit our website at cork.tech
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The transparent, composable and deterministic nature of blockchains makes it a perfect infrastructure for credit markets to operate on. We believe it is inevitable credit markets flow onchain, but in the process of doing so the market must mature. In our view, the onchain credit market currently revolves around pegged assets with credit-like attributes and credit-like risks attached to them. In aggregate what we refer to as onchain credit (LRTs, LSTs, stablecoins and private credit) have accumulated well over 200b$ of TVL, with rapid growth especially in the categories of yield bearing tokens. Whilst the growth has been impressive, it is a drop in the bucket for the 300t$ global credit market which will flow onchain in the coming decades.
From a market structure perspective, when there is significant outflows from pegged assets, there is a high likelihood that these assets loose their peg, sometimes resulting in cascading liquidations and temporary market turmoil. In traditional finance central bank swap lines are deployed to buffer liquidity shocks and within offchain credit markets, investors can leverage risk management tools like Credit Default Swap to hedge their credit risks. In crypto, no such instruments exists. To support the growth of onchain credit markets, we need onchain native “Credit Default Swap like” instruments that serve both as a liquidity instrument and hedge for investors to enable risk management when exposed to onchain native credit.
Cork has developed a new form of primitive, the Depeg Swap, that allows market participants to trade pegged asset risk, effectively creating a risk pricing protocol that enables new forms of risk management and protection. We believe Cork represents foundational risk management infrastructure the onchain credit market requires to mature and be ready to onboard the next trillions of credit to crypto rails. Our goal with this primitive is to expand the use and utility of onchain credit, to enable more capital to flow onchain whilst reducing the volatility in the market. In the following sections, we in detail outline the mechanisms, use cases and future of Cork.