Persistence bridges the gap between DeFi and traditional finance by facilitating the borrowing of crypto assets using real-world tokenized assets as collateral. The company aims to position itself as a protocol that powers new-age financial products with a focus on the fixed income markets to start.
We spoke to CEO Tushar Aggarwal to find out more.
Aggarwal’s journey into crypto began hosting a podcast called Decrypt Asia, in which he interviewed various stakeholders, including exchanges, fund managers, regulators and more. That gave Aggarwal the opportunity to build up his personal brand and do some networking. From there, he wrote for the Southeast Asia version of TechCrunch, which led to a job at LuneX Ventures, where the team launched Southeast Asia’s maiden regulated crypto venture capital fund. He was involved in a fundraising round in 2018, when they raised capital from large investors. Overall he did seven equity deals and managed a liquid portfolio of 8-12 tokens.
After meeting a bunch of founders, Aggarwal, who is originally from India, decided to move over to being an operator vs. a capital allocator, describing it as moving over to the “dark side.” Singapore was a great place to build a business, but India had better talent prospects. Plus it’s one of the top countries for unicorns, trailing only the United States and China. The crypto space was quiet in India at the time, so he continued visiting hackathons, where he met the team that is now a part of the Persistence team.
Key to this journey was one family office that was in the commodity trading space, which led to the creation of Comdex, one of the applications in the Persistence ecosystem.
(9:34) “I think given how early the industry is, I think there’s definitely more potential for impact as a founder,” he said, adding that he has 100% of his assets in crypto.
The skill-sets required to be a founder are different than those for an operator. It’s more about building a team and managing the egos of the co-founders, Aggarwal noted. It’s a combination of looking after employees, running operations, finance, compliance, fundraising and managing the token aspect of it all, which is why Aggarwal finds it more challenging than his previous career.
Persistence is positioning itself as a protocol that powers new-age financial products. The first asset class they’re targeting is trade finance. Persistence allows users to pledge real world assets as collateral to be able to borrow stablecoins.
(12:28) “Over a period of time, not only do we want to be focused on some of the real world assets, which are represented using NFTs, but we want to be able to focus on some interesting digital assets, or crypto assets themselves, which can be used as collateral, which are thus far not used as collateral in order to facilitate the borrowing of stalbecoins — one of them being staking derivatives,” said Aggarwal.
Overall, Persistence is an ecosystem of new-age financial products with an initial focus on the fixed income markets, or trade finance, which produces about 6-8% on an annualized basis in a very scalable and sustainable way. Staking derivatives is an entirely new product that helps to unlock the liquidity of the staked assets, especially as POS and delegated POS chains become more prevalent, such as the launch of Eth2 beacon chain in the past week.
Persistence is a Tendermint-based project that is part of the broader Cosmos ecosystem. They started from a top-down approach, the actual problem. The aforementioned family office in the commodity trading space had highlighted certain issues for stakeholders, such as a fragmented market, long translation settlement times, traders having difficulty gaining access to financing, etc. Large institutions don’t have this problem but SME traders do.
Persistence tried to build on Ethereum and Russia-based Waves but decided to go with Tendermint for reasons such as regulatory compliance. Also, another reason for going with the app-specific chain was because you can customize these chains to suit the security of the validator you need to validate the chain. You can customize for privacy even without Zero-Knowledge proofs, which can be enforced through something like an MOU.
(17:41) “We were early bettors on the POS ecosystem, on the delegated POS ecosystem. At the time that we started building, there were literally just two options in terms of POS: It was Tezos or Cosmos. In terms of flexibility that Tendermint provides, and in terms of providing interoperability with other blockchains natively, we made the decision to go ahead with Tendermint,” explained Aggarwal.
So Tendermint is used for consensus. But Persistence built its own SDK, which has a bunch of modules that cover the end to end journey, or exchanges and marketplaces, including trader onboarding, asset tokenization, asset exchange, trade financing and trader reputations.
Use Cases and Applications
Persistence is building certain applications in house, and there are certain apps that third-party developers within their network are building. Comdex is the first application that was built using the Persistence SDK. It is an end-to-end commodity trading and trade financing solution and has traded about USD 41 million worth of physical commodities so far, across copper, soybean and barley. It is an institutional-focused app that is dedicated to SME traders and SME trade finance organizations.
(19;50) “With the massive boom of the stablecoin market cap this year, instead of exclusively focusing on institutions, what we realized is that there’s a lot of liquidity to be tapped from the crypto markets, specifically the stablecoin markets. So what we’re doing is now building a crypto-native app where we can offer retail traders trade finance as an asset class, which is an access class that they don’t typically have access to. And on the other side allowing commodity traders to borrow from stablecoin holders,” Aggarwal said.
Considering that Comdex is an institutional focused app and has institutional clients, everything that happens on the platform is 100% regulated and completely compliant in Singapore. The gray area, Aggarwal notes, is that the entire DeFi space is lacking KYC/AML standards for some of theDeFi apps. In the meantime, Persistence is operating similar to other apps, which is through wallets.
Persistence with its SDK model has cleared more functionality, which allows people to build apps on top of it. They integrated moving up the value chain and creating their own app as well. So it’s not only at the SDK level but also moving up the value chain and creating apps and capturing the end user as well. Persistence is driving most of the development of the SDK but they welcome third-party developers to come in at the SDK level.
Persistence’s long-term goal is to be chain-agnostic. Aggarwal believes that all chains will eventually interoperate with other chains. So speaking of going after the end use cases, it makes sense to gravitate to where the highest amount of liquidity is, which at the moment is Ethereum, which Aggarwal notes has its own limitations, which is why they want to interoperate with Ethereum but keep some things on the Tendermint side.
(32:42) “Again, this whole ‘one chain to rule them all’ and base layers trying to go aggressively after entrepreneurs, I think over a period of time, I believe all apps will coexist on multiple chains,” said Aggarwal.