On August 31, 2020, Morpher Labs introduced the launch of its flagship Ethereum-based contract buying and selling and prediction market platform, Morpher, with the said purpose of offering customers limitless entry to long-and-short trades of real-world shares, commodities, and FOREX markets.
The technical obstructions of such a purpose, nevertheless, have traditionally confirmed difficult to navigate.
In a current interview with Cointelegraph, Morpher Labs CEO Martin Froehler defined that Morpher’s imaginative and prescient is to permit worldwide entry to asset lessons that usually have a number of limitations within the type of geographical restrictions, middlemen, and steep charges.
“The purpose of the platform is to allow anybody residing on Earth to commerce belongings 24/7, that includes minimized charges and with no need a counterparty,” stated Froehler.
Many initiatives harbor comparable ambitions, however have been hampered by the seemingly intractable downside that arises at any time when initiatives attempt to supply on-chain customers entry to real-world belongings and their value motion: liquidity.
Synthetix, as an illustration, permits customers to mint artificial belongings that observe the worth of real-world belongings akin to gold or the Nikkei inventory index. Nevertheless, their platform requires customers to carry a amount of SNX tokens at a 600% ratio to the worth of their artificial asset portfolio with the intention to mint new synthetics or withdraw their funds.
Equally, prediction market Augur permits customers to guess on the result of real-world occasions — say, if the worth of a selected asset exceeds a sure threshold inside a specified date — however the protocol has by no means managed to crack $three million in TVL, in accordance with DeFi Pulse.
In these cases, liquidity both comes within the type of a heavily-collateralized hen, or as an egg that by no means hatches.
Morpher, in the meantime, is trying to sort out the liquidity downside with a token-economic resolution.
“The [Morpher] sensible contract creates or destroys MPH token relying on the result of [a] guess,” explains Froehler. “E.g. a 100 MPH token guess on Apple turns into 110 MPH if Apple good points 10%, or 90 MPH if Apple loses 10%.”
This peer-to-contract system hypothetically permits for limitless liquidity, as any consumer can enter and exit a MPH-denominated guess of any dimension.
Nevertheless, Hristo Piyankov, a token financial system knowledgeable and Chief Information Officer at REINNO, cautions that this mannequin might result in conditions the place liquidity dries up for MPH holders.
“To provide an instance,” Piyankov defined to Cointelegraph, “If at present 1 MPH is traded for 0.015 DAI after which unexpectedly the whole provide of MPH doubles (as a result of a tracked underlying asset doubled in worth), wouldn’t it be attainable to promote all these newly minted MPH for 0.015 DAI every (the definition of liquidity), or would this drive the worth of MPH down (suggesting that the token is illiquid vs different well-established currencies)?”
When requested about this dynamic, Froehler contends that such worth fluctuations happen in real-world markets as nicely, although with much less extremes.
“If the typical consumer has a return of say 5 % per yr, there are 5 % extra MPH token that yr. Assuming a relentless market capitalization, solely customers with returns higher than 5 % make a revenue, whereas everybody with decrease returns has a loss,” he says.
“This may increasingly appear odd at first, nevertheless it simply replicates what occurs on conventional markets. Merchants who don’t outperform the inflation charge lose, even when their nominal returns have been optimistic,” he added.
Up to now, the outcomes of Morpher’s mannequin have been blended. In keeping with Forehler, within the almost two months since launch Morpher has attracted 28 thousand customers. The Morpher Twitter account, nevertheless, has reported quite a few withdrawal outages.
Whereas it stays to be seen if Morpher will have the ability to clear up the issues confronted by prediction markets, Froehler stays a zealot for the tip mission: to supply international entry to actual world belongings with out middlemen:
“We’re satisfied that the complete potential of the Morpher Protocol will solely unfold as soon as it’s universally accessible, and we’re working exhausting on making that occur.”