Fusion’s Time Value Extraction in Practice
Written By: John Liu and Alg Ore
The concept of Time Value stems from Time Value of Money (TVM). This financial principle describes that money in your hand today is worth more than that at some point in the future. Fusion’s founder DJ provided a good overview of Time Value in both money and assets at DAS in 2019 (transcript here), and how Fusion’s Time Lock protocol captures time value natively at the point of asset digitization. If you want to learn more about what time value is, and how time value is additive and fungible, you need to read through DJ’s keynote address.
The idea that assets other than money have a higher value today than they have tomorrow might seem foreign, but every asset has a value over time. Buildings, cars, software licenses, gold, oil, and more. Time value has been effectively captured by financial instruments today like equities, bonds, and derivatives, but less efficiently (if at all) captured in non-financial instruments, like buildings or intellectual property.
However, with Time-Lock and Quantum Swap paired with the borderless and fractionalizing possibilities of asset digitization, Fusion allows anyone to easily and safely extract time value by splitting assets in sections of time and allowing trading of these time sections. For a few examples of how Time Value is realized on Fusion, have a look at Staking the Fusion Way , this article outlining how Fusion enabled users to realize a 20% APR on stable coins, or this video describing time value transactions.
While these are definitely interesting theoretical applications, outside of Fusion’s staking, are there practical adoptions of the theory?
WeDeFi: Time Value Swaps in Action for Safebet
WeDeFi, the company that wrapped Fusion’s powerful protocol into every-day use to usher in mass adoption, recently unlocked values of Fusion token holders with a very exciting application of Time Value Swaps. On May 9th, WeDeFi tweeted an option to increase buying power of assets that were already sitting in their users’ wallets by 15x-20x. To no surprise, the swaps were taken in minutes.
How were they able to do this? Let us review the details of a swap that was put on Fusion’s Quantum Swap marketplace by WeDeFi on May 9th.
The swap fill above consists of Fusion tokens on the receiving and sending sides or “legs” of the swap, a ratio of these two legs, and the total number of “parts” indicating how many fills of this type were transacted.
Specifically, we can see that FSN was swapped on both sides with a ratio of 10:0.586 and a total of 500 parts. At first glance, these details seem too good to be true — swapping 10 FSN for 0.586 FSN, where is the catch?
The important data point lies in the dates below each asset fill. These dates represent the start and end dates of the token Time Value. With this information, we see that ownership of 10 FSN between May 9th and July 17th which is being swapped for ownership of 0.586 FSN from July 17th to Forever (Forever means that the asset will return to full ownership on the start date).
In other words, a value of FSN that begins at some point in the future (financial equivalent: Futures) was exchanged to borrow FSN for a set amount of time (financial equivalent: Bonds).
The maker, WeDeFi, lent their 5,000 FSN until 7/17th to the taker(s) and will receive 293 full FSN at the same time as the 5000 FSN is returned on 7/17th.
We are excited to see the realization of time value markets by applications like WeDeFi, which help the general public create wealth by extracting the value in their assets as efficiently as the financial markets. All this in a single, trust-less transaction per party!
PS. Don’t have WeDeFi yet? Get the app on the Google Play store.