Qredo Review

What is Qredo?

Qredo is a Layer 2 decentralized custodian protocol. Based on Ignite CLI, a command line interface built on Cosmos SDK, Qredo uses a Consensus-Driven Multi-Party Computation (CD-MPC) to provide asset security. Multi-party computation generates segregated deposit addresses, reducing the risk of private key theft. It combines ownership, compliance, and cross-chain capabilities to offer institutional-grade security, cross-platform liquidity, cross-chain atomic swaps, and interoperability in an open-source manner.

How does Qredo work?

Security is one of the critical institutional investors' needs in DeFi. Custodial services currently dominate the digital assets custody space. The issue with this domination is that these services don't offer deep liquidity and capital efficiency. Users face a tricky situation where they are forced to trade-off between safety and liquidity. Hence, they have to hop between hot wallets (with internet connectivity) and cold wallets (without internet connectivity). 

MPC (Multi-Party Computation) technology presents itself as a solution to this problem. It makes it possible to replace individual private keys for the signing of transactions.  The technology distributes the signing process between multiple computers. Each computer possesses a piece of private data representing a share of the key. Together, these computers cooperate and sign transactions in a distributed manner.

The Qredo ecosystem relies on decentralized MPC, cross-chain liquidity protocols, a settlement system, and an EVM-compatible blockchain architecture. Qredo's MPC serves as the project's unique selling proposition since it decentralizes the storage of private keys. Qredo achieves decentralization by implementing MPC with a Layer 2 blockchain and using a Threshold Signature Scheme (TSS), a type of MPC. Using TSS, shares can be created and distributed in a private key, ensuring that no individual is in complete control of the private key. All MPC nodes generate their secret keys, which are protected from external attacks in a tamper-proof enclosure, courtesy of the security measures such as key rotations. These security keys are distributed between six data centers around the world. Coupling Layer 2 blockchain permits the creation of instant cross-chain and cross-platform liquidity. Transfer fees on Qredo are said to be low, while custody is free of charge.

How to use Qredo?

Qredo protocol's front-end is the Qredo app; signing into the web application demands a PIN and biometrics on the user's part. Wallet administrators can create organizational accounts and authorize users as administrators, for example, managers and traders. Each party has permission to invite other wallet account holders to join their trusted network and view all the account activity, outstanding orders, and inventories. 

In order to open a Qredo wallet account, users first need to establish their Qredo identity, validate their credentials, download the Qredo signing app, pair their mobile phones, create a Master Seed and then finally sign in to the Qredo network. 

Qredo's partnership with MetaMask paves the way for users to access DeFi easily and securely. Users can transact and access decentralized applications from a single crypto wallet across the EVM ecosystem with the supported chains. Some of these chains include Ethereum, Polygon, Fantom, and Avalanche. 

Interoperability between chains is imperative in today's crypto world. Qredo allows users to make cross-chain atomic swaps with Qredo fees of 0.5 basis points (BPS) per transaction. That equals 0.005% per transaction, as one basis point is equal to 1/100th of 1%.

Qredo allows users to stake their QRDO and earn passive returns. The network's staking protocol helps validate the network further, thereby improving the overall network stability. A staking calculator provided by the platform helps users determine how many tokens they need to stake to achieve the desired goal. 

The QRDO token

QRDO is the utility and governance token for the Qredo network. The total amount of QRDO tokens is hard capped at two billion. These tokens will be released in two ways i.e. vesting schedule and inflationary emissions. 

One billion QRDO tokens are set aside for investors in Qredo Ltd. 22% of these tokens are allocated to the core Qredo team in a 24-month vesting period with a 12-month cliff, 34.30% are allocated to investors in a 24-month vesting period with a 12-month cliff, 11% are kept for the ecosystem’s development in a 48-month vesting period with no cliff and 4% are kept for rewarding the initial validators of the network with no vesting period. Similarly, 3.70% are allocated to advisors with no vesting period, 7.216% for a private sale with an 18-month vesting period and a 6-month cliff, and 4% went for a public sale with either 12 months vesting period with a 6-month cliff or no vesting and a two months cliff, while for treasury/reserves, the number is 3.784%. During this initial lock-up period, users can stake tokens on the platform to earn rewards but not withdraw them with full flexibility. By implementing this model, the platform aims to maintain sustainable growth. 

The second billion of QRDO tokens will be released through inflationary emissions. This will happen when v 2.0 of the protocol goes live, an event that is expected to happen before the end of 2022. These emissions will decrease over time, and their total lifespan is expected to be around 50 years. 

QRDO is designed to reward all network participants. There are six user types on the Qredo network. These are Market Makers, Validators, Traders, Custody Users, Liquidity Providers, and Borrowers.

Market Makers continuously give buying bids and selling offers for digital assets on the Qredo network. Market makers must deposit a minimum USD value of digital assets into their dedicated inventory wallets and stake a minimum amount of QRDO tokens in their dedicated staking wallet. Here, the minimum numbers are determined using economic activity measures between the genesis and current input blocks. 

To participate in the protocol, validators must deposit QRDO tokens in their dedicated validator staking wallet. Traders are firms/individuals using the protocol's Layer 2 to do atomic swaps between themselves and a market maker or a known counterparty. 

Custody Users are firms/individuals using the protocol's Layer 2 for safe custody over their digital assets. Liquidity Providers (LPs) get rewarded by the protocol from the fees generated when trade users take out loans and trade from Qredo's loan pools, to which LPs always add liquidity. As for Borrowers, they take out loans for short-term trading and yield farming. Loan pools are a key feature of the Qredo v 2.0 protocol, which is not live yet. 

The platform is proud of the user-centric incentive structure it has come up with, which economically favors all network participants. It uses fee-based compensations and inflation-based compensations to reward the network's stakeholders. In the fee-based compensation, traders and Custody Users pay fees deducted from Layer 1 assets undergoing transferring, trading, or storage. Qredo distributes these fees as rewards. In inflation-based compensation, fixed rewards are distributed per epoch. For Traders, compensation depends on the percentage share they pay in fees, for Custody Users on their percentage share in the total assets under management, for Market Makers on the percentage in the trading volumes, and for Validators on the percentage share in total staked and delegated tokens.

Is Qredo safe?

In the case of custodial services, assets are lost once seed words are compromised. Qredo allows users to take the entire control and responsibility of their wallets courtesy of an extra security layer through governance (initiate transaction, then approve through custodians). If a user's seed words are compromised, attackers need their email to verify a password restore attempt.

According to the Quantstamp June 2021 audit findings, four issues were identified. These issues were described as privileged roles and ownership (acknowledged), missing input validation (fixed), allowance double-spend exploit (mitigated), and clone-and-own (acknowledged). The NCC July 2020 audit concerned itself with the cryptographic assessment of the Qredo Apache Milagro MPC library. The audit found two issues of low-risk nature concerning Schnorr Proofs and Proofs of Knowledge. 

Key members of the Qredo leadership team include Anthony Foy (CEO), Brian Spector (CPTO), Josh Goodbody (COO), and Duncan Payne-Shelly (CFO). Anthony Foy has over 20 years of experience in VC-backed growth companies. Brian Spector is a cyber security expert with twenty years of experience in advanced cryptography. Josh Goodbody has fifteen years of experience in operational leadership with cryptocurrency exchanges like Binance and Huobi Global while Duncan Payne-Shelly has over ten years of experience in fintech. 

Partners

Currently, Qredo's collaborations include Metamask, Avalanche, Celsius, Coinbase, 10T, Nexo, Auros, HexTrust, and Clearpool to mention a few names. The platform secured an $80mm Series A funding round, led by 10T Holdings, including strategic investments from Coinbase Ventures, Avalanche, and Terra. 

Qredo has also strategically partnered with HedgeGuard, an investment management software provider, to increase its access to market participants, from both crypto and traditional finance sectors. The network also allied with Banco Hipotecario, API3, and Sovryn to fuel El Salvador's plans to make Bitcoin a legal tender. Furthermore, Qredo is a member of the MPC alliance, the primary MPC industry body seeking ways to accelerate the adoption of this technology.

What's next?

In the second half of 2022, Qredo aims to beef up network security, bring liquidity to self-custody via PowerSwap, and introduce an industry-leading policy engine. Products that the platform plans to launch soon include WalletConnect integration, Travel Rule - an enhanced insurance solution, and the introduction of a computational custodian. Travel Rule is one of the Financial Action Task Force (FATF) requirements, which demands financial institutions disclose client credentials when making a transfer to another financial institution. 

Polkadot and BNB chain integrations, user APIs and CSV export, and Block Explorer are some of the other works in progress. In the long term, the Qredo roadmap envisions new blockchain integrations including Stellar, Ripple, and Elrond plus power DeFi API (thereby making programmatic access of DeFi protocols possible and in doing so, helping users to engage in rapid-fire trading, multi-leg yield farming, and crypto lending as well as crypto staking) transactional notes, exchange integrations, and read-only APIs.

Links

https://www.qredo.com/technical-papers