A brief overview of Velo Labs, the Federated Credit Exchange Network and the Velo Protocol to get you started.
Who is Velo Labs?
Backed by the Stellar Network and the CP Group — one of the biggest conglomerates in the world — Velo Labs is a fintech company currently serving business partners in Southeast Asia.
Velo Labs’ mission is to build a Federated Credit Exchange Network, powered by the Velo Protocol.
By connecting the legacy finance, CeFi and DeFi industries, Velo Labs’ Federated Credit Exchange Network positions Velo Labs as one of few blockchain projects with a clear path towards mass adoption.
What is the Federated Credit Exchange Network?
The Federated Credit Exchange Network (FCX) is a unique distributed network that connects an array of traditional, centralized and decentralized finance partners. Standing firmly in the Federated Finance category,
the FCX combines the efficiencies and freedom of DeFi with the well-worn, mature practices and standards of CeFi and legacy systems.
It is this approach that makes it possible for the FCX to enable the liquid exchange of digital credits pegged to any fiat currency while guaranteeing last mile settlement using the VELO token.
Before participating in Velo Labs’ FCX, there are several stipulations to which all network participants must abide. These include:
- VELO tokens serve as the FCX’s universal collateral;
- VELO token transactions are confirmed using a Federated Byzantine Agreement — the Stellar Consensus Protocol;
- The FCX’s core function — issuing and transacting with digital credits pegged to any fiat currency — is built on the Velo Protocol.
Behaviours outside the scope of these stipulations are left to the network participants to govern. A more detailed write-up can be found here.
What are VELO tokens?
VELO is a cryptocurrency issued on the Stellar Network. As a “bridge asset,” VELO tokens link the value of traditional assets to digital credits pegged 1:1 with any fiat currency, via the Velo Protocol.
As VELO tokens back every transaction made on Velo Labs’ FCX, VELO tokens serve as the network’s universal collateral.
VELO tokens can currently be traded on the following exchanges:
VELO tokens can be stored in any wallet compatible with Stellar-based assets. More details here.
What is the Velo Protocol?
The Velo Protocol is a financial protocol that issues digital credits pegged to any fiat currency, and ensures that these digital credits are always collateralized by the right amount of VELO tokens to maintain a 1:1 digital credit to fiat currency value ratio.
It is made up of two primary components: the Digital Credit Issuance Mechanism and the Digital Reserve System.
Digital Credit Issuance Mechanism
The Digital Credit Issuance Mechanism issues digital credits pegged to any fiat currency by staking VELO tokens in collateral pools.
Digital Reserve System
The Digital Reserve System automatically rebalances the VELO token collateral pools to maintain a 1:1 value ration between issued digital credits and their related fiat currency. This process is best illustrated via the following example:
Both the Digital Credit Issuance Mechanism and the Digital Reserve System require Turing-complete smart contracts.
As VELO tokens are Stellar-based tokens, and the Stellar Network does not support Turing-complete smart contracts, Velo Labs uses the Hermes Warp Protocol to engage a proprietary blockchain called Evrynet to achieve these vital functions.
The Hermes Warp Protocol
The Hermes Warp Protocol is a cross-chain protocol that bridges the Stellar Network, Evrynet and Ethereum. The Hermes Warp Protocol allows digital assets to “move” from one blockchain to another.
Technically, a given digital asset exists on all chains simultaneously. However, while a digital asset is active on one chain, it is automatically locked on the others. More detailed explanations about the Hermes Warp Protocol can be found here.
What is Velo Labs solving?
Velo Labs’ Federated Credit Exchange Network, powered by the Velo Protocol, is a foundation upon which financial services providers are able to construct real-world applications in service of today’s increasingly complex user and business landscape.
By using the Velo Protocol, Velo Labs’ partners can issue digital credits pegged to any fiat currency for use in their day-to-day operations.
This gives partners the ability to conveniently transact with businesses across the globe, without necessitating fiat deposits in every market.
Additionally, because the number of VELO tokens collateralizing these digital credits are automatically rebalanced as the value of VELO tokens fluctuates on the open market, partners are protected from default and overcollateralization scenarios.
This approach also sidesteps the issues of market volatility that plague the adoption of blockchain solutions.
The Velo Protocol’s first real-world partner use case — developed by Lightnet Group — is an inclusive international remittance ecosystem aimed at empowering the region’s large underbanked and financially underserved population.
By working hand-in-hand with partners in the legacy, CeFi and DeFi market segments, Velo Labs is able to bridge the multiple, formally disconnected networks that comprise international remittance, across the five layers of today’s international remittance system.
Who are Velo Labs’ Partners?
- CP Group
- Stellar Foundation
- UOB Venture Management
- Signum Capital
- DU Capital
- Ausvic Capital
- Settle Network
- Everest Ventures Group
First Use Case — International Remittance
- Velo Labs, TEMPO Payments, and Bitazza open up a $17Bn remittance corridor between Europe and Thailand with the Stellar blockchain
- Inception signs partnership with Velo Labs and opens remittance corridor between Indonesia and SEA countries
- FinClusive and Velo Labs Announce Partnership to Streamline Cross-Border Payments with Financial Crimes Compliance
- Lightnet Group
VELO, the cryptocurrency issued on the Stellar Network, is trending following a spike in trading fees despite a market downturn.
According to CoinmarketCap, the token is trading at $0.00979, a 27% jump in the last 24 hours.
Velo partners with Visa, Lightnet, iRemit
The company partnered with Visa, Lightnet, iRemit, and Inception to develop payment solutions in Asia jointly.
Velo Labs announced the collaboration in late 2020 and will work with the companies to address Asia’s micro, small, and medium enterprise (MSME) lending market.
“We are delighted to be a part of this unique cooperation along with trusted partners like Velo Labs and Visa. We are providing customers from the MSME market with another pathway to build credit and improve financial wellness.”
Tridbodi Arunanondchai, vice chairman and group CEO of Lightnet Group.
The partnership between the three firms will allow near real-time global transactions between financial service providers such as banks and money transfer operators.
The initiative is aimed to enable users with poor or inexistent credit histories to receive a line of credit by depositing digital assets as collateral.
The approach will connect over one billion unbanked and underbanked individuals in the Asia Pacific region (APAC) to the global financial system.
What makes Velo Labs unique?
Velo Lab’s Federated Credit Exchange Network (FCX) is a foundation where financial service providers can issue digital credits pegged to fiat currency for daily operations.
Velo Lab’s partners can transact with businesses across the globe without having fiat deposits in every market.
The number of VELO tokens collateralizing the digital credits is automatically rebalanced as the value of VELO tokens fluctuate on the market.
VELO is a cryptocurrency issued on the Stellar Network as a bridge asset. This means the tokens link the value of traditional assets to digital credits at a 1:1 ratio with any fiat currency on the Velo protocol.
VELO tokens serve as the network’s universal collateral and can be traded in several exchanges, including Bithumb, KuCoin, Bitfinex, and OKEx.
Velo Labs was founded by Chatchaval Jiaravanon and operates in Southeast Asia.
Disclaimer – The information provided in this article is solely the author’s opinion and not investment advice – it is provided for educational purposes only. By using this, you agree that the information does not constitute any investment or financial instructions. Do conduct your own research and reach out to financial advisors before making any investment decisions.
This article is meant as an introduction for newcomers. This article may be periodically updated as necessary.