AllianceBlock: Building the Future of Finance

Nexera Foundation
6 min readFeb 11, 2021

What is AllianceBlock aiming to achieve?

As decentralized finance (DeFi) emerges rapidly, traditional financial institutions (TradFi) are only watching from the sidelines unable to participate in the massive innovations mainly due to compliance and regulatory restrictions. The question has become: “How to connect Traditional Finance (TradFi) with the Decentralized and Digital Asset markets (DeFi) in order to allow a seamless and compliant flow of capital between both worlds.

Our solution will enable the digitalization of real-world assets such as real estate or commodities to be represented by digital tokens. All digital assets will be investable, bankable, fungible, and accessible to all DeFi and TradFi participants. DeFi and TradFi participants will be able to interact with, transfer, and exchange assets and data in a compliant and straightforward way, promoting capital flow between the two, now distinct, markets. Through this, we will provide a secure and regulatory compliant gateway for trillions of dollars present in TradFi to flow towards DeFi and enable DeFi platforms and protocols to be used by a much greater audience. In doing so, we will unlock DeFi for the world.

We are building the AllianceBlock protocol as a series of interconnecting but independent modules. These modules will combine to form the AllianceBlock protocol, but can also operate as standalone products.

The initial product set (modules) includes seven products

  1. Cross Border Regulatory Compliance Rule Engine: Our rule engine will enable compliance in a more cost, agile, and resource-effective way, as outlined previously. This underpins the entire protocol
  2. Compliant P2P and NFT (lending, borrowing, and participant protocol): We are creating a P2P lending and structured loan platform with a fiat gateway to enable real-world assets to be leveraged in DeFi products such as lending and insurance. This can be used by TradFi and DeFi firms to provide both more products and gain additional access to participants. For example, a wealth manager could take advantage of this to take a client’s asset such as art or jewellery, digitize it as an NFT, offer it through a P2P solution that which sees participants lend and receive the (tradeable) NFT as collateral. The NFT would then be burned upon repayment.
  3. Onchain Investment Data API: We are building an API to house both on-chain data and data from specialist providers to create cutting edge analytics for TradiFi firms and also our DeFi partners such as ParsiQ, Ocean Protocol, Chainlink, and API3 to leverage. Both TradFi and DeFi firms will need access to this data to build new innovative trading algorithms which leverage a full range of data.
  4. DeFi Investment Terminal: Our Defi Terminal will allow users to access real-time, granular, and actionable blockchain data. This could be used by TradFi or DeFi firms as well as participants seeking market information, in much the same way as Bloomberg Terminals are used.
  5. Derivative and Structured Product Pricing Engine and Risk Analytics: Our Pricing Engine will provide cutting edge risk analytics, backtesting, and stress testing strategies, and will be integrated into our Liquidity Mining solution to solve the risk of Impermanent Loss for users providing liquidity. Other DeFi protocols would be able to incorporate this into their own liquidity mining solutions, while participants can use it to gauge their risk. It also has other uses; for example, a market maker may use it to test strategies.
  6. Data Tunnel: The Data Tunnel will make it easy for anyone to publish, monetize, use, and analyze data through the Ocean marketplace. This could be used by TradFi and DeFi firms seeking to publish and monetize data, as well as users, easily.
  7. Trustless KYC/AML and Identity Verification: We are creating a decentralized identity solution that will allow users to prove their identity in a trustless manner while letting them retain control of their data. This can be used by TradFi and DeFi firms as a more efficient alternative to current KYC processes, but also provides a better solution for investors.

What are real-world issues being solved by AllianceBlock protocol?

  • Institutions cannot currently access DeFi due to, amongst other things, regulatory concerns. For example, different jurisdictions treat blockchain assets differently from many perspectives, including ownership rights, securities laws, and taxes.
  • Firms struggle to use DeFi because most assets managed remain in legacy formats and thus are unusable on blockchains. We will automate the process of converting any digital or crypto asset into a derivative that is investable, bankable, fungible, and accessible to the entire regulated finance industry.
  • Businesses spend billions a year on complying with increasing regulations worldwide, this detracts from their core business,s making them less efficient. We will ease the compliance burden financial institutions face in several ways. For example, a client banking at multiple institutions will have to complete Know-Your-Customer (KYC), and Due Diligence (DD) checks at each firm. This process is often lengthy and costly. We will make it so that a client can complete the check once, after which they will be able to share proof of their status to any applicable institution.
  1. participant globally on their clients’ behalfs. However, investment regulations differ significantly between jurisdictions, making it difficult for firms to market and sell products to their participants. AllianceBlock will make it easier for institutions to transact and source participants globally
  • Institutions face issues in incorporating new technologies. Upgrading legacy tech can be expensive, challenging, and prone to being outdated by the time of implementation. We are building a protocol that traditional institutions can easily plug into using APIs, avoiding compatibility, cost, and resource issues that plague many banking implementations of new technologies
  • There are many competing protocols, and betting on only one is another risk to ultimate success. AllianceBlock is a blockchain agnostic protocol working across blockchains, meaning that any participant will be able to take advantage of our protocol regardless of what blockchain they use

Who benefits from the AllianceBlock protocol?

TradFi: As outlined above, AllianceBlock brings a host of benefits to private banks, investment banks, wealth managers, asset managers, stock exchanges, sovereign funds, mutual funds, pension funds, and credit unions. It also allows service providers such as traders, brokers, lenders, KYC firms, and other intermediaries to connect and benefit from the same advantages.

DeFi: Any protocol, platform, or project will be able to integrate many of the modules we are developing, while DeFi as an ecosystem will benefit from increased capital flows and resources from traditional finance players.

Participants: Ultimately, participants globally will benefit from AllianceBlock by increasing the range of and access to products from both TradFi and DeFi and reducing participant pain points such as repetitive and time-consuming KYC processes and loss of personal data.

Why is the token ALBT needed?

ALBT is a multipurpose utility token that underpins the entire AllianceBlock ecosystem and allows for low-cost financial services processing that distributes profits across all stakeholders rather than flowing to one centralized actor. It serves a range of uses, including:

  • Payment mechanism: All actions on the AllianceBlock protocol are payable in ALBT. Service providers will be incentivized to earn ALBT, while service consumers will pay in ALBT. For example, users can be paid in ALBT for publishing their data, while data consumers will similarly pay to access the data.
  • Subscription/features: Certain services will only be available to those who pay a fee in ALBT
  • Staking: AllianceBlock will utilize a Delegated Proof of Stake consensus model to secure the network. Regulated and transparent entities will stake ALBT to act as a node and receive a proportion of generated ALBT from fees in return. There are three types of nodes on the AllianceBlock protocol:
  • Institutional nodes, which agree on consensus and can provide updates to the network
  • Data nodes that allow the owner of the node — who must comply with data regulations of selected jurisdictions — to process data on the protocol
  • Service nodes which businesses, companies, or advisors supplying services on the protocol must operate
  • Integration: Third-party applications integrating their service into AllianceBlock will be required to pay a certain amount of ALBT, which will be subsequently redistributed to network participants
  • Fiat payments: ALBT will be paired with select fiat currencies to facilitate integrated fiat gateways

About AllianceBlock

AllianceBlock is building the first globally compliant decentralized capital market. The AllianceBlock Protocol is a decentralized, blockchain-agnostic layer 2 that automates the process of converting any digital or crypto asset into a bankable product.

Incubated by three of Europe’s most prestigious incubators: Station F, L39, and Kickstart Innovation in Zurich, and led by a heavily experienced team of ex-JP Morgan, Barclays, BNP Paribas, Goldman Sachs bankers, and quants, AllianceBlock is on the path to disrupt the traditional market with its state-of-the-art and globally compliant decentralized capital market.

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Nexera Foundation

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