Anvil has launched a DeFi protocol - a set of rules and systems built on blockchain technology - for letters of credit (L/Cs) that allows people to access financial services without needing traditional banks or intermediaries.

The fintech's DeFi protocol is built on Ethereum, a blockchain-based technology that allows people to build and run programmes on the internet without needing a central authority, such as a bank or tech company, to manage them.

Anvil's DeFi protocol facilitates the issuance of fully secured credit. It allows users to deposit collateral into vaults, issue collateral-backed L/Cs, and make vault-based tokens available to collateral pools.

Collateral vault and pool

Anvil's protocol encompasses several key components. A collateral vault is a smart contract that holds collateral assets deposited by users. It serves as the foundation for issuing credit within the Anvil protocol.

Time-based collateral pools meanwhile are designed to manage collateral over specific time periods. They offer fixed-term lending and borrowing, automatic interest accrual, and liquidation mechanisms to protect lenders.

These pools allow users to participate in time-bound financial activities with predefined terms and conditions.

L/Cs on Anvil

L/Cs in the Anvil protocol are digital representations of traditional financial instruments.

They function as promises to pay backed by collateral in vaults and transferable assets within the Anvil ecosystem.

Transforming collateral

"By issuing transparent and generalisable credit, Anvil provides sustainable liquidity -essentially creating trusted money for the global economic system," according to founder of Anvil, Tyler Spalding who sees the protocol as an innovative form of money collateralised with crypto.

"Permissionless decentralised technologies can transform how collateral is managed by making the process more secure and more transparent," he concludes.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.