Application of Cryptography & Blockchain in FinCypher System to Optimize the CDO Development
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Overall, cryptography is applied in the Fincypher infrastructure to ensure that electronic records among distrusting participants in a secure and confidential way without compromising the independent verifiability of the data. We believe that the securitization industry (not only DeFi but broader traditional finance) would benefit from FinCypher technology in order to allow all market participants, including investors, to join the ledger while preserving confidential information. Fincypher could allow investors and issuers to interact on the same decentralized digital platform and get access to near-real-time updates about CDO performance while preserving the confidentiality of the underlying loan-level data.
The beauty of the technology is that even without sharing sensitive loan-level data, investors can still perform analytics on the hidden data at the pool level, which allows them to monitor the performance of their loans and improves their ability to price risk efficiently and independently. It allows investors to build their own queries at any point in time. For instance, an investor could query trends about loan default for one particular asset class instead of waiting for the service reports. All queries (sum, mean, correlation, etc) are interactive and the party that the investor is trying to query must exchange information with the investor otherwise he cannot query the table, another form of information control for issuers and servicers.
The pool disclosure–the loans, with their performance and yields– in the security’s offering documentation could also be automatically and almost instantly updated to reflect the very latest portfolio performance.
Furthermore, FinCypher providing investors the ability to perform anonymized analytics that is publicly verifiable provides additional security, transparency and reduces the asymmetry of information in the market.
