Unlocking DeFi Liquidity: Time-Bound Tokens Revolutionize Locked Assets Trading

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In a groundbreaking move, crypto startup Hourglass has launched the first-ever marketplace for trading Time-Bound Tokens (TBTs). This inventive approach allows users to gain liquidity from their locked-up assets in decentralized finance (DeFi) protocols by selling the rights to the time duration in a secondary market.

The creation of this marketplace is driven by the need to address the challenges faced by users who have their assets locked in DeFi protocols, which can lead to lengthy wait times for withdrawals. Hourglass seeks to eliminate this problem by allowing users to trade their position in the queue, effectively transferring their ownership of a locked asset to another buyer.

The platform’s launch coincides with Lido’s Version 2 deployment, which aims to facilitate the liquidity of staked ether. Lido currently holds the top spot as the most extensive liquid staking platform in the DeFi space, with more than $12 billion in total value locked (TVL) across the Ethereum ecosystem, as reported by DefiLlama.

In practical terms, this means that if a user holds, for instance, 10 Frax ether and stakes them into the Frax protocol for a month, they will receive 10 TBTs. Alongside any potential staking rewards, these TBTs can be traded in the secondary market for liquidity.

This trading arrangement works similarly to any other secondary market, with discounted prices available for TBTs based on the duration of the locked-up asset. For instance, a trader could bid for a 3% discount on ether (ETH) with a 10-month lock-up period. Importantly, the TBTs will be issued by Hourglass custodian smart contracts and are ERC1155s standard semi-fungible tokens.

However, this innovative solution isn’t without its downsides. The non-custodial nature of the TBTs means that the founding team will have no control over deposited assets. Furthermore, while the tokens are held through custodian smart contracts, users can only redeem their matured TBTs for the original asset upon reaching the end of the lock-up period.

Notably, Hourglass currently plans to charge no fees for trading on its platform. The startup has already raised $4.2 million in a seed round led by Electric Capital and featuring several prominent investors, such as Coinbase Ventures, Circle Ventures, Tribe Capital, hack.vc, and additional angel investors.

As the first of its kind, Hourglass’ TBT marketplace demonstrates the potential for innovative solutions in addressing DeFi liquidity challenges. However, it remains to be seen how the market will respond to the advantages and drawbacks inherent to this pioneering system.

Source: Coindesk

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