Reimagining the financial derivatives in the new era of DeFi with FinCypher
2 min readFeb 23, 2021

CDO is one of the most potential segments in DeFi but still underrated. FinCypher was born to bridge the gap between traditional finance CDOs and smart-contract CDOs.

The lack of CDO infrastructure in DeFi

Collateralized Debt Obligation or CDO is a derivative instrument that enables the repackaging of risky debt obligations and loans into financial security. In the traditional financial markets, CDO plays a crucial role in the effective allocation of the credit risk in the market, enabling market participants to hedge their positions and speculate on the credit risk.

Inevitably, CDO is an important instrument between borrowers and lenders, enabling capital to rotate throughout the financial market.

Unfortunately, the DeFi space, which wants to beat traditional finance, currently lacks CDO infrastructure. We have bankers such as Curve Finance (CRV) with Iron Bank, lending platforms such as Alpha Finance Lap (ALPHA) with Alpha Homora, Aave Protocol (AAVE), etc. But with these platforms, the yields are highly volatile and risky, which creates a significant barrier of entry for risk-averse investors.

All the disadvantages above prevent average investors from entering the DeFi sphere.

The new era of DeFi CDO with FinCypher

The FinCypher CDO enables the stabilization of the interest rate of the pool of the loans involved in the system. Each of the class of tranches provides a different interest rate which is based on the class. The interest rate is directly correlated with the riskiness of the tranch. Tranches with higher seniority in the contract (less risky considering the payback of the underlying), provide a lower fixed interest rate than the other tranches which are riskier.

In short, FinCypher is designed to bring a stable interest rate for borrowers, de-risk the flash loans, and help crypto assets rotate from the hand of the lenders to the hand of the needs.

The potential of FinCypher token

The FinCypher token has 2 main functions in the system. First, it is applied as a base currency in the Fincypher ecosystem for the trade of Fincypher Crypto CDOs. Secondly, token drives the governance process in Fincypher ecosystem allowing stakeholders to securely execute Fincypher protocol upgrades.

Overall, FinCypher token will be the system’s governance token, empowering token holders to vote on updates to the platform. Combining governance mechanisms and incentivizing holders, it will serve as a means to align the different stakeholders in the system.

Opium (OPIUM), one of the first CDO projects in the space, is pumping recently right after listing on DEXs such as Uniswap, 1INCH, and SushiSwap. With the high potential of CDO markets in DeFi, FinCypher token promisingly gets a