Introducing Depos

Nov. 6, 2019

Introducing Depos: A "decentralized bank" fully collateralized by digital assets, run by a team from BCG, INSEAD, and MIPT

A love for technology and discovery brought together an entrepreneur, a mathematician and a programmer to form Depos, a turn-key stablecoin solution that enables any enterprise to create their own cryptocurrency with characteristics superior to existing stablecoins.

Back in 2015, CEO Oleg Bakatanov left his role as a strategy consultant with BCG to begin his entrepreneurial journey. He first encountered Maskim Mironov (Max) and Andrey Perepelitsyn at Ai1st, an algorithmic trading fund in Moscow.

The youngest of the bunch, Max is a graduate of the prestigious Moscow Institute of Physics and Technology, with several math and programming national competition medals under his belt. Max’s background is in quantitative finance with a focus on high-frequency trading.

Andrey is recognised to have kick-started the trio’s exploration of blockchain. As the first person on the team to start building smart contracts, he encouraged them to study the functionality and capabilities of different blockchains when they delved into cryptocurrency trading technology. This road led to them building stablecoins and ultimately starting Depos.

In a nutshell, what is Depos?

Oleg: At Depos, we build stablecoin solutions which are scalable and transparently collateralized by the bonds/debt issued by well-known businesses.

What was the inspiration behind it?

Oleg: In the last couple of years, stablecoins started becoming a major trend in crypto, as most cryptocurrencies were struggling to deliver on their promises, including real economic transactions such as payments, international trading and credit. 

Max: We saw the appearance of many stablecoin models with varying designs. Major stablecoins were still using fiat as collateral, which has centralization risks and poor economics. Stablecoin models that use only crypto as collateral are often more reliable, but they face limits with scalability. 

Oleg: Currently, banks issue money backed by debt (loans and bonds). This mechanism is quite good and reliable, but only if the underlying assets are transparent and they pay fair interest to compensate for risks.

So we asked ourselves, what if we built a stablecoin fully based on blockchain, and collateralized by good quality bonds/debt that are issued by real businesses? This is a well-proven economic model. It is not only scalable, but also brings great value to all parties involved - stablecoin holders, borrowers and investors. Adding the blockchain layer allows it to be decentralized and transparent.

Depos’ concept is built around this idea. Instead of using fiat in banks as collateral, we use good quality bonds/debt issued on the blockchain which pay fair market interest rate. This means, we aim to act as an intermediary between borrowers and money holders using blockchain smart contracts.

Andrey: We recently issued the first stablecoins collateralized by bonds from Deutsche Bank. Our plan for the future is to create a well-diversified portfolio of debt instruments with clear credit quality.

How were you convinced to go into blockchain full-time?

Andrey: In 2017, while working at Ai1st, we started to experiment with cryptocurrency by performing algorithmic strategies like arbitrage and market-making. Later on, we applied the experiences in long-short systematic strategies which we gained in high-volatile emerging markets. The Ai1st cryptocurrency hedge-fund which we launched in 2018 has already delivered more than 250% in profits to investors.

Trading different cryptocurrencies and studying them, we saw huge opportunities in stablecoins. We understood issues in existing solutions and thought hard about how to approach them. 

We believe that stablecoins are one of the most important areas where blockchain and crypto can really impact the real economy and the market opportunity was just too great.

What drew you to the ZILHive Program?

Oleg: The blockchain solution we build uses a complex smart contract, requiring a very effective blockchain platform in terms of transaction speed and processing costs. Many well-known platforms still struggle to meet this expectation. 

Zilliqa’s promise is to provide a fast and scalable solution via sharding while maintaining a good level of decentralization. By joining the program and building the project on Zilliqa, it is a great opportunity for both Zilliqa and Depos to show the high effectiveness of our technologies.

What are Depos’ plans for the near future?

Oleg: At present, we are focused on negotiations to cooperate with several companies to use our approach to create stable cryptocurrencies. The fastest go-to-market strategy for us is to build partnerships with entities or communities that already have established customer bases, and create stablecoins together. When one of such discussions ends in launching a pilot, it will be an indication of the strength in our approach and strategy, thus paving the road for Depos’ future.

What kind of sacrifices did you have to make, starting-up Depos? 

Oleg: There are many personal risks and sacrifices involved in building your own start-up. Rather than taking up roles in large well-known corporates with a stable salary, clear long-term prospects and limited responsibilities, we have decided to take on roles where we are only able to predict our future a couple months ahead at a time. 

Andrey: Another decision that we made was to relocate geographically, from Moscow to Singapore. It was a move that we decided on as we think this is a more conducive environment for a crypto/fintech start-up. Our priority is to ensure the success of Depos, which means that we now live in an unfamiliar environment, away from our friends and families.

Depos has a unique distribution model that incentivizes its partners to adopt stablecoin solutions and earn interest. You can learn more about them here.

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