Synthetic Equities
A hybrid system for synthetic equities:
Multitude's innovative model revolutionizes the process of converting cryptocurrencies to synthetic equities by leveraging a seamless integration with a regulated stockbroker partner. When a verified user connects to the platform (with an Ethereum wallet), they can view real-time prices of various equities, quoted in both cryptocurrencies (BTC/ETH) and stablecoins (USDC, etc). The quoted prices are based on the current market value provided by our regulated stock broker partner, with a small spread to support platform operations, and incorporating a Min/Max Received mechanism to address cryptocurrency volatility, similar to the current DEXs swap process.
Upon initiating a purchase, the platform will use the rapid settlement capabilities of the Arbitrum layer 2 solution to execute the transaction. The stock broker partner attempts to purchase the real-world asset at the quoted price. If successful, the user's funds are transferred, and the broker custodiesreal-world the asset. (If unsuccessful, the transaction will fail.) The platform then automatically mints a corresponding number of ERC-20 tokens via a trustless smart contract, which are sent to the user's wallet and represent their 1:1 ownership of the real-world asset. If the user transfers or sells their onchain ERC-20 tokens, the new owner now has ownership of the backed real world asset and can redeem their shares on our platform at any time.
Trading synthetic equities during market closures:
Multitude's platform enables users to access liquidity and trade synthetic equities even during traditional market closures. If a user logs in while the corresponding market is closed, they have two options:
Submit a limit order for execution when the market reopens.
Trade within the Multitude market, involving the exchange of 1:1 backed synthetic tokens.
1. Placing a Limit Order
To place a limit buy/sell, the user selects the trade conditions (price/quantity/slippage) and signs a transaction onchain to approve their purchase and give access to the required assets to fill the order. If submitting a buy this will be the digital currency they would like to use to buy, if submitting a sell order they give access to the tokenized NFTs.
When the corresponding trading market reopens, our partner logs orders and, when conditions are met, attempts to make the trade. Before making the trade, our platform queries the user's wallet to check that they have the funds to make the order: if for any reason the user's funds are not available (for example, they have spent/transferred them) then the order is canceled. This protects our users from gas fees on failed transactions, should their circumstances change. If the trade is completed, the procedure happens as above, with the addition that the user will receive a notification (e.g. via the app or email) should they wish.
2. Using Our Multimarket
In the second option, users can take advantage of uninterrupted trading and access market liquidity by trading on Multitude's own proprietary Multimarket. Here, the platform orderbook dictates the current price. It is anticipated and intended that the price of equities fluctuate when their markets are closed recognizing changing market forces, presenting opportunities for traders. When two parties agree on the terms, the platform acts as an intermediary, buying the synthetic equity from one party and selling it to the other, with a small platform commission. The new holder of the asset will be updated with the custody provider upon market open. Since all platform users have undergone KYC and AML checks, these transactions are recorded as two separate events – one to Multitude and one from Multitude to the other user.
Benefits of Our New Synthetic Hybrid Approach
This innovative approach to synthetic asset trading allows users to obtain liquidity and capitalize on market opportunities 24/7. The synthetic assets, always denominated 1:1 with their real-world counterparts, enable users to buy and sell assets based on their evaluations of the company's worth or to access liquidity for other investments. As the synthetic assets maintain a 1:1 backing, any price fluctuations out of hours should naturally be arbitraged back to parity upon market reopening.
By implementing this groundbreaking hybrid model, Multitude significantly improves accessibility and flexibility in global financial markets. Eliminating traditional market time constraints allows our verified users to react in real time to market movements and trade during off-hours when news breaks or economic events occur.
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