We recently caught up with Dr. Torsten Stüber, Co-Founder and CTO at Berlin-based Pendulum, an initiative focused on traditional finance infrastructure blockchain solutions, which is “the missing link between fiat and DeFi.”
Pendulum is an open-source blockchain built on the “proven” Parity Substrate framework, establishing the missing link between fiat channels and the fast-evolving decentralized finance ecosystems through a sophisticated smart contract network.
Dr. Torsten Stüber has shared insights on several crypto industry trends and innovations such as stablecoins, the importance of compliance, and tokenization.
Our discussion with Dr. Torsten Stuber is shared below.
Crowdfund Insider: Please tell us about the process of tokenization of fiat currencies on Pendulum and how it is compliant with local jurisdictions?
Torsten Stuber: We work with local financial institutions or fintech companies that issue fiat tokens on Pendulum and that hold customer deposits 1:1 in reserve in insured accounts. These institutions are required to fully comply with their local jurisdiction and global standards, i.e, they are required to maintain a comprehensive AML policy and need to be able to perform KYC checks on new customers.
Crowdfund Insider: Please explain how integrations with other blockchain ecosystems, such as Stellar, work on Pendulum?
Torsten Stuber: We integrate other ecosystems via blockchain bridges. These bridges allow to seamlessly move tokens between different chains. Additionally, they make it possible to transfer information across chains in a secure fashion – this is the foundation for true cross-chain applications.
The bridges we build are properly decentralized and trust minimized, which makes them particularly secure. One of these bridges is called Spacewalk – this is the bridge that connects Stellar to Pendulum.
Crowdfund Insider: Please provide more details on the Spacewalk feature and its role on the platform.
Torsten Stuber: Spacewalk allows users to move assets between Stellar and Pendulum. Since Pendulum is a part of the Polkadot network of blockchains, Spacewalk even connects Stellar to the whole Polkadot ecosystem. It is based on peer reviewed scientific research and supported by a Web 3 Foundation grant.
Stellar has been very successful in connecting its network to the fiat world and has an abundance of fiat backed stable coins and compliant on- and off-ramps. Spacewalk is an important element for our goal to make Pendulum the central hub for stable coins and fiat tokens.
When we designed Spacewalk, we had three principles in mind. First, it needs to satisfy our strict criteria of decentralization because this is essential to keep them secure. Second, in accordance with the foundational principles of blockchain technology users are not required to trust any third party. Third, Spacewalk is censorship resistant so that end users are guaranteed to be able to use Spacewalk to transport their tokens between Stellar and Pendulum.
Crowdfund Insider: How does the use of stablecoins on Pendulum affect the development and efficiency of DeFi applications?
Torsten Stuber: Stablecoins provide a stable store of value that eliminates the volatility issues commonly associated with cryptocurrencies. This allows for the use of stablecoins in a wide range of DeFi applications, such as lending, borrowing, trading, and insurance, without the risk of rapid devaluation.
Stablecoins that are pegged to a variety of fiat currencies increase their utility for users who want to transact within different regions, for example for cross-border payments. This facilitates the integration of blockchain technology into traditional financial systems.
Crowdfund InsiderL Can you give an example of a specific DeFi application that will be built on Pendulum?
Torsten Stuber: One specific application for Pendulum is a decentralized foreign exchange (forex) market. Pendulum will be the ideal foundation for a network of automated market makers and decentralized exchanges, which will allow users to trade various stable coins pegged to different fiat currencies, such as the US dollars, Euro, and British pound, on the blockchain.
This would provide a transparent and decentralized alternative to traditional forex markets, which can often be opaque and subject to manipulation. Overall, this would greatly improve the accessibility and efficiency of the forex market for end users.
Crowdfund Insider: How does Pendulum plan to ensure trust-minimized market prices for fiat currencies?
Torsten Stuber: Pendulum plans to utilize a network of decentralized oracles. These oracles will be responsible for providing the current actual market prices for various fiat currencies. By distributing the responsibility of price reporting among multiple oracles, we can reduce the risk of any single point of failure or manipulation.
Additionally, we will use a consensus mechanism to ensure that the prices reported by the oracles are accurate and reflective of the current market conditions. By using this decentralized approach, we can ensure that the prices provided on our platform are trust-minimized, transparent, and accurate.
Crowdfund Insider: Can you expand on the privacy features offered on Pendulum for businesses and how they comply with regulatory requirements?
Torsten Stuber: Pendulum offers an optional privacy feature that allows businesses to make their transactions private, while still being able to reveal them to authorities if necessary. This feature is designed to meet the specific needs of businesses that want to keep their transactions confidential while still being compliant with regulatory requirements.
The optional privacy feature works by allowing businesses to selectively hide sensitive transaction details, such as the amount and the parties involved, while still maintaining a public record of the transaction on the blockchain. This allows the business to maintain their competitive advantage by keeping the details of their transactions private while still being able to demonstrate compliance with regulatory requirements by revealing the necessary information to authorities.
Crowdfund Insider: How does Pendulum’s focus on business applications differ from other DeFi platforms?
Torsten Stuber: Pendulum is specifically designed to meet the unique needs of businesses. One example is the optional privacy system explained above and other features that enable businesses to be regulatory compliant, for example, easy integration of KYC and AML requirements.
Pendulum is built on a robust and scalable infrastructure that is designed to handle the high volume and complex transactions that are typically associated with business use cases. This allows businesses to operate on our platform with confidence, knowing that their transactions will be processed quickly and efficiently.
Pendulum will work closely with the business community to understand their needs and will continuously improve and enhance our platform to meet these needs. This collaborative approach allows us to deliver a tailored and comprehensive solution for businesses that is not available on other DeFi platforms.
Crowdfund Insider: Can you discuss any partnerships or collaborations that Pendulum has established or plans to establish in the future?
Torsten Stuber: Pendulum will establish partnerships and collaborations with market makers and local financial institutions to tokenize fiat currencies directly on our blockchain. This allows us to provide a seamless and transparent link between the traditional financial system and the decentralized world.
In the future, we plan to establish more partnerships and collaborations with market makers, financial institutions, and other players in the DeFi space to expand the range of services and products we offer. By working with partners who share our vision for the future of finance, we can create a more inclusive and open financial system for all.
Crowdfund Insider: How does Pendulum’s technology and approach contribute to the larger goal of disrupting traditional payment systems?
Torsten Stuber: As a blockchain, Pendulum allows for decentralized, transparent, and tamper-proof transactions. This eliminates the need for intermediaries and central authorities, which reduces the costs and increases the security of transactions.
With Pendulum’s focus on business needs and compliance, such as the optional privacy feature, we aim to make it easy for traditional financial systems to adopt blockchain technology and take advantage of the benefits of DeFi.