Since Intain’s inception in 2018, the goal has been to build the “boring blockchain” plumbing that drives transactions for every structured finance transaction in the world.
Siddhartha said that after going the first crypto winter without a token launch and gaining 20 partners last year, that possibility is within reach.
“If you look at the credit industry, everything that’s hot in technology is being adopted in lending, from AI underwriting, 20-second lending, digitalization, etc. But by the time this loan enters the capital market cycle, it just starts moving Excel sheets and emails,” Siddhartha said.
“So it’s almost like the windward and leeward sides of technology: all the technology is upstream in the loan, and there’s absolutely nothing in the background.”
Truth and automation of data
Siddhartha said Intain hopes to solve this problem, integrating the old Excel sheet system via rails into a private but single-truth ledger system that opens up secure financial data to more than just transaction flow.
He explained that the team did not plan to build a blockchain platform, but instead used blockchain technology to run the data layer with AI and analytics on top.
Intain enables partners to integrate structured finance deals into their ledger for real-time data visualization, portfolio tracking, and automated smart contracts that Siddhartha says creates a proprietary marketplace for structured finance deals.
“Our goal is to make the entire structured finance process completely transparent, reliable and efficient.”
He said he now aims to create a retail element. While striving to be the number one structured finance platform, the team has built a defi tokenization element for securitized loans for crypto traders.
Intain survives the hype
More than a decade after the 2008 financial crisis, structured finance is still stuck in the past, Siddhartha said. For each transaction, the industry plays ping-pong between the fiduciary, the investor and the broker. All of that is becoming a thing of the past with blockchain, Siddhartha said, a diverse system searchable by anyone with keys to its “siloed database.”
But after building the idea in 2018, where was it: Surviving the hype train that infected the crypto and construction space said Siddhartha.
Instead of offering tokens and a retail ICO investor, Intain has gone the infrastructure route for trad fi institutional use in a very niche way.
“We launched in the US in early 2019 at the Vegas Structured Finance Conference; we signed the first partner later that year, and we went live in 2020,” Siddhartha said. “We’ve kind of survived others who have tried to tackle this issue, and after an initial struggle to convince people, we now have the momentum.”
The platform welcomed 20 customers in 2021. Siddhartha said the volume of transaction flows had doubled from $ 2 billion at the end of the third quarter in September to about $ 3.9 billion during the course of the third quarter. period ending on December 31st.
Why blockchain for a database-like technology?
Siddhartha said raising capital is very inefficient in the United States in structured finance. To automate it, you need three things, Siddhartha said.
“Number one is a version of the truth, which means the service, the trust rating agency, the investor; everyone should agree on the facts in this matter. This is something blockchain gives us,” he said. “The second provided by blockchain is immutability, and the third; auditability. We use blockchain in our data layer for all three of these features, but we’re not really building a blockchain platform.
Suppose a company has issued 50,000 loans to be securitized as collateral to raise funds; they need a party to verify these loans. With Intain, that happens automatically, and investors can see in the market “that’s 50,000 genuine loans,” Siddhartha said.
This is where the AI engine comes in; To read the loans and compare them to the data. Siddhartha said the loans are “sliced” or structured into different “pools” based on risk, time to maturity or other factors. Intain automatically categorizes slices through smart contracts that make it easier for the industry.
Slices of intelligent automatic contract
“Let’s say we will have a loan pool of 10,000 loans: the safest loans would be invested by insurance companies, mutual funds can invest in the middle tranche; the lower tranche, sometimes referred to as the equity tranche, can be invested by hedge funds,” Siddhartha said. “I’m purely simplifying this, but all of these structures are written into our platform as smart contracts.”
When real-world services like banks and insurance companies interact with these loans to collect monthly payments, they use separate software that doesn’t make it easy.
To build the smart contracts, Siddhartha said the team learned from European regulator ESMA, which has published best practices for every asset class, from credit cards to commercial real estate loans. At the push of a button, the contracts calculate the amount of money each tranche owner receives in the payout based on ESMA data.
This means that things are automated and investors or lending services can easily search for loans at a glance: the system is more like a market. Data on every conceivable searchable metric, like tranche borrowers who live in Florida or have exposure to Russian assets, is automatically stored in the ledger.
“I might want to know if COVID cases in New York are very high relative to my New York loan exposure, I can understand that,” Siddhartha said. “But it could also be that the borrower is in New York, and I’m worried about the COVID cases, but the property is in Florida, where real estate prices may go down? So I can explore based on the state of the borrower or the state of the property: I can carry out all the analyzes that I wish to carry out. »
Intain uses Hyperledger Fabric
Intain works on Hyperledger Cloth after being chased by many different blockchain architectures, like Altri. Siddhartha said that they have been working on the Hyperledger platform since version 0.9 since 2018, a private permission blockchain.
“It’s a private permission blockchain, so we don’t face the challenges that Ethereum, etc. faces. It’s easy to bring parties to our platform because nothing is public. is not as inefficient or slow as many public blockchains,” Siddhartha said. “When we tokenize any of these pools and list it for investment, it will be through public blockchains, but any our administration will be on a private blockchain.”
Future plans for the domination of the world
Intain aims to be the default industry platform by the end of 2023, and Siddhartha said they are in line to achieve this goal.
The hardest part is convincing a world of new crypto enthusiasts why they chose the boring plumbing infrastructure route. He said the new challenge is to design a defi platform to encourage new crowd-funded investments in structured finance deals.
“We talk to four of the top five directors; one of the top five admins is already on a platform. So that’s something we should be able to achieve in about a year and a half to two years,” Siddhartha said. “It’s not an innovation for us. It is the 2019 innovation 2020. So now, we are working on the problem: can I take these tools and symbolize them and get a brand new set of investors who provide capital from the loan sector? »
The idea is to build a system that normalizes a tokenized $10 million transaction for online investors. The team plans to launch a defi pilot by the end of the second quarter of this year, by June, Siddhartha said.
“How would adoption happen there, I don’t want to put a timeline because it’s a completely different area,” Siddhartha said. “But that’s our perspective, to be the default admin layer in trad fi, and then use that infrastructure as a bridge to bring trad fi issuers into the defi world to get capital.”
Deif and the end of postmodernism
Eric Mitzel, vice president of sales and client solutions in North America, said the blockchain industry has grown. As a result, blockchain platforms have become routine but crucial layers of trust.
“There is an incredible amount of investments in decentralized finance in the Blockchain, and we do not need to be part of it for the moment because it is crucial to strengthen credibility by providing results,” said Mitzel. “We have made cautious progress to implement a pragmatic use of the Blockchain who acts as a bridge to the existing world of structured finance, served by agents and trustees in the industry.”
Contrary to the idea that Tradfi does not want investors to ruin their organized slices, Siddhartha stated that the delicate part of the investment should be convincing the natives of cryptography to get involved.
“In fact, the friction is the other way around: Due to the crypto boom, the defiant investor is someone who has tasted blood. They are almost looking for 15-20% returns,” he said.
“The lender who raises capital seeks to raise capital to 3-5%. The challenge here would know how to invest a challenge: someone who is so used to eating steak, how to make him eat broccoli?”
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