Introduction

Why Mystic

The volume of tokenized securities (e.g. bonds, stocks) is projected to explode in coming years, as institutions realize blockchain rails are more efficient than their current infrastructures and thus can provide cost benefits.

Currently sitting at around $40 billion in volume, most tokenized securities sit on private blockchains and are controlled by banks and asset managers. It is Mystic’s assumption that tokenized securities on public or semi-permissioned blockchains will also dramatically increase, as institutions focus more and more on generating revenue with these assets beyond just cost-cutting.

Securities-backed lending is standard practice in the financial space, as it enables investors to access liquidity on their portfolio and thus leverage their positions. Crypto-backed lending has itself taken much inspiration from securities-backed lending. However, as tokenized securities come onchain, existing crypto-backed lending platforms are unfit to support securities, which must abide by anti-money laundering legislation and thus have different requirements than digital assets.

What is Mystic

That’s where Mystic comes in - we’re making a environment dedicated to securities-backed lending which supports both securities and digital assets whilst remaining compliant with all relevant legislation. We do this by keeping tokenized securities with qualified custodians to offload regulatory oversight from the asset issuers and setting pool-specific KYC requirements which increase permissionless access but also enables us to modularly support any asset.

A big issue in the tokenized assets space is fragmented liquidity - as multiple parties can tokenize the same underlying asset, multiple assets exist that represent fundamentally the same thing (e.g. more than one asset representing gold). This causes liquidity to be fragmented across these tokens.

Mystic solves this by creating vaults which can supply to any set of pools, all of which are isolated from each other in risk. This means that, for example, one may choose to lend USDC against a gold-only vault, which in turn supplies this USDC to multiple pools collateralizing gold tokens created by different issuers. This approach enables these gold tokens to share liquidity with one another, maximizing efficiency as much as possible. From a risk standpoint, all pools are isolated from one another, which means that although they share liquidity, their risk is contained to their own pools (i.e. a liquidation in one pool will not drain liquidity from another pool in the same vault).

The result of this architecture is a protocol that can modularly support both tokenized securities and digital assets, whilst maximizing efficiency and reducing risk. Mystic is the materialization of the DeFi lending markets of tomorrow, ones ready to support real-world collateral and bring DeFi to the masses.