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What did JPMorgan Chase do for the first time when it executed a DeFi transaction?

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Why did JP Morgan choose to partner with Polygon and Aave?

Author of the original text: Ty Lobban, director of JP Morgan Blockchain Launch

Compilation of the original text: 0x214, BlockBeats

On October 19, the Monetary Authority of Singapore (MAS) announced the launch of the "Project Guardian", which will cooperate with the financial industry to test The feasibility of asset tokenization and DeFi applications, as well as risk control for financial stability and integrity.

On 2 November, MAS announced that the first of its Project Guardians to explore wholesale funding markets The industry pilot project (First Industry Pilot) for potential DeFi applications in China has completed the first real-time transaction. Among them, DBS Bank (DBS Bank), JP Morgan (JP Morgan) and SBI Digital Asset Holdings conducted a liquidity pool consisting of Tokenized Singapore government bonds, Japanese government bonds, Japanese yen (JPY) and Singapore dollar (SGD). Forex and government bond trading. The pilot successfully conducted a real-time cross-currency transaction involving tokenized yen and Singapore dollar deposits.

Head of JP Morgan Blockchain Launch and Onyx Digital Assets Department, Enterprise Ethereum Alliance (Enterprise Ethereum Alliance) ) Board member Ty Lobban published an article explaining in detail what role JPMorgan Chase played in Project Guardian, and BlockBeats translated it as follows:

JPMorgan Chase has used DeFi, Tokenized deposits and verifiable credentials (Verifiable Credentials, VC) to execute the first real-time transaction on the public chain, which is part of the MAS-led Project Guardian.

We have created many world precedents. Since the transaction takes place on the public chain, this article will be made public , Transparently explain what we have done.

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In the first step, we use the Polygon network for transactions.

We originally wanted to execute this transaction on Ethereum, but since we want to use a relatively low Gas fee to perform a series of authentication-related Expensive operation, (we chose Polygon). Of course, given that MAS aims to be an open and interoperable network, Guardian will also explore the possibility of other blockchains in the future.

In the second step, we use Aave to adopt their "permission pool concept".

We deployed a modified version of Aave Arc in order to set certain parameters such as interest rates and foreign exchange rates. Please click on the link to view our deployed lending pool.

BlockBeats Note: Aave Arc is a liquidity pool that requires permission, specially for institutions in DeFi domain to maintain regulatory compliance. These liquidity pools will be separate from existing pools on Aave and will require extensive KYC.

In the third step, we issued tokenized SGD deposits.

This deposit token will be included in the comprehensive debt of JPMorgan Chase. This is a native token that provides stable on-chain value without the scalability issues that Stablecoins face. This is the first tokenized deposit issued by a bank. Please click the link to view the SGD Tokenized deposit contract issued by JPMorgan Chase.

The fourth step, we use the World Wide Web Consortium W3C verifiable certificate VC is Aave ( or any other DeFi protocol) to provide compliant access.

Compared with whitelist addresses, VC can provide more fine-grained control, including risk limit, asset limit, etc. Moreover, we have implemented on-chain VC authentication.

Verification of VC on the chain is very complicated, and it brings composability to identity. We hope to bring further standardization and portability to identity by using a small number of professional validators and using them in dApps, like "identity Lego bricks"!

Our design principle is to ensure that VC compliance checks can be used with any DeFi protocol, and These agreements do not need to know any information about VC, so that the DeFi front-end does not need to carry out KYC. Compliance is pushed to the edge, not dApps.

Please click link to view validators. We created a validator for each company in Project Guardian. So each company has its own rules, but anyone can review and verify these rules. Strictly speaking, the VC verification on the chain is not pioneered by us. My construction is not perfect and I am still exploring ZKP technology.

Additional note: As a strictly regulated bank, JPMorgan Chase prohibits money laundering, so KYC necessary. Considering the above problems, we hope to improve the security of our DeFi fund pool by using VC and whitelist. Institutional DeFi is worth looking forward to.

The fifth step, we build an institutional wallet.

1. Traders can never access company funds;

2. Only approved DeFi protocols can be institutionalized Access;

3. VC is bundled with transaction instructions, that is, VC can be traded on the chain, otherwise the transaction will fail;

Click the link to view the real-time transaction between SGD and JPY.

In short, this is the first VC-based DeFi project on the public chain by a regulated large financial institution One-time real-time transaction of tokenized deposit. About how institutional DeFi can support the next generation of finance, and about Project Guardian For more information, please click the link to view.

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