Building a Composable Fiat Chain With Interoperable Blockchain Offering

Pendulum CTO Torsten Stuber on Building a Blockchain Platform for Stablecoin

Torsten Stuber is the CTO of Pendulum, a blockchain platform that aims to bridge the gap between fiat currencies and decentralized finance (DeFi) by tokenizing fiat currencies and building a blockchain optimized for DeFi applications for stablecoins. The platform will directly integrate on- and offramps with banks or fintechs in respective countries and build bridges to other blockchain ecosystems that already have a great support and a supply of stable coins and fiat tokens.

Pendulum: The Bridge Between Fiat Currencies and DeFi

Ishan Pandey: Hi Torsten Stuber, welcome to our series “Behind the Startup.” Please tell us about yourself and the inspiration behind Pendulum?

Torsten Stuber: Hey Ishan. I used to work as a researcher and lecturer in theoretical computer science. I always had an entrepreneurial mindset and left academia after many years to work on more practical problems and become a tech startup founder. During my time as a founder, I became increasingly interested in blockchain technology and how it will impact and disrupt society. I wanted to combine my two passions for startups and blockchain and eventually joined SatoshiPay, the company that originated Pendulum, over five years ago as a CTO.

I still consider that the most important application for blockchain technology is to disrupt traditional payment systems and provide a faster, more inclusive and cost-effective alternative. Stable coins are the foundation for driving this change, particularly fiat-backed tokens. The emergence of smart contracts allowed for an incredibly wide variety of new applications and started the field of decentralized finance that enabled a more flexible and trustless alternative to traditional financial systems. We founded Pendulum to bring the power of DeFi to the traditional world of fiat currencies.

Ishan Pandey: Can you explain how Pendulum Chain aims to bridge the gap between fiat and decentralized finance (DeFi)?

Torsten Stuber: The main ingredients are the tokenization of fiat currencies and a blockchain that is optimized for DeFi applications for stablecoins. Our ideal goal is to have a token equivalent for every fiat currency on Pendulum that is totally compliant with local jurisdictions. On the one hand, we will directly integrate on- and offramps with banks or fintechs in respective countries. We will build bridges to blockchain ecosystems that already have a great support and a supply of stable coins and fiat tokens. Stellar is a prime example of such a blockchain and Pendulum will integrate a bridge to Stellar that we call Spacewalk.

Our focus on stablecoins allows us to optimize Pendulum in unique ways that makes it easier to develop DeFi applications for this use case and that makes applications more efficient and cost-effective for the end user. This is greatly facilitated by Substrate, the underlying technology that powers Pendulum.

Ishan Pandey: Can you discuss some of the innovative features and tools that Pendulum will offer?

Torsten Stuber: Many protocols and applications that will be built on top of Pendulum will require up to date market prices of fiat currencies. Pendulum will have first class support for price oracles that provide the most recent data in a decentralized and trust-minimized fashion. Furthermore, Pendulum will contain very efficient building blocks that are common to most DeFi applications tailor-made for stable coins, for example components that make automated market makers more cost-efficient and faster.

Pendulum will be also tailored for business applications. We will integrate features that make it easy for applications to be compliant directly on the blockchain level, for example to track KYC across protocols. Additionally we will integrate a system of optional privacy that allows businesses to keep company secrets confidential but at the same time to be transparent with regards to authorities as required by law.

Ishan Pandey: How do you envision Pendulum contributing to the future of DeFi and formal economy?

Torsten Stuber: Pendulum will be a leading platform to bridge this gap and will enable traditional formally registered businesses to participate in decentralized finance. This is particularly due to the unique features I pointed out above: Pendulum will mirror the system of fiat currencies in a compliant manner and will be tailored for business needs, such as compliance and privacy. Businesses will greatly benefit from using DeFi because being able to use trust-minimized applications will highly reduce friction and cost for everyday use cases such as cross-border payments and interaction with other businesses.

Ishan Pandey: Can you provide examples of some of the use cases and applications that Pendulum is targeting with its platform?

Torsten Stuber: Pendulum will make cross-border payments faster, much more cost-effective and more transparent. A big driver of this will be a global foreign exchange (forex) market on Pendulum. This will be powered by a rich ecosystem of diverse forex-optimized decentralized exchanges and automated market makers.

Ishan Pandey: What are some of the specific goals and initiatives that the company is currently working on?

Torsten Stuber: Our biggest goal right now is a successful launch of Pendulum in February and a strong token generation event that will take place during this launch. We have been working towards this goal for over a year, this is very exciting for us. At the same time we will also launch Spacewalk, our Stellar bridge, and Amber, a next generation forex-optimized automated market maker that is our first ecosystem project.

Pendulum will be part of the Polkadot network of blockchains. One of the next steps after the rollout is to establish bridges to other blockchains on Polkadot to tap into the already substantial supply of stable coins in that network. We will also integrate the first direct fiat on- and offramps shortly after the launch.

Ishan Pandey: How does Pendulum address the issue of liquidity in the DeFi space ?

Torsten Stuber: We are preparing a program for incentives to attract liquidity to Pendulum and work closely with our partners to address this issue. We believe that the main drivers for liquidity are actual real world use cases that noticably benefit the end user and a user experience that lowers the barrier for the adoption of blockchain technology. With its focus on bridging the gap between fiat and DeFi, Pendulum aligns perfectly with these goals.

Ishan Pandey: How do you feel the FTX debacle will impact the development of web3 technologies and the mainstream economy? How can confidence be restored ?

Torsten Stuber: I think that the FTX situation is not a signal to reject but to adopt blockchain technology. The whole debacle happened because of intransparency and fractional reserve banking – both are characteristics of traditional finance and stand in stark contrast to web3, where the financial system is based on transparency and decentralization, does not require trust and makes manipulation impossible. We need to educate the public about this crucial difference and point out that the decentralization of web3 is the only right approach and the future.

Ishan Pandey: Can you talk about Pendulum's approach to compliance and regulation, as well as how it intends to solve the many regulatory problems that DeFi platforms face?

Torsten Stuber: With our focus on business applications we acknowledge the importance of complete compliance support in blockchain applications. First, on Pendulum we target fully compliant stable coins. Furthermore, Pendulum will provide building blocks for compliance such as a global KYC system to track user identities across applications and tokens in a frictionless manner.

We closely follow changes in the regulatory landscape such as the introduction of MiCA in Europe. The technology that underlies Pendulum allows it to adapt to regulatory changes and to implement according features without generating blockchain forks. This way Pendulum will stay up to par with regulatory requirements.

Ishan Pandey: How does Pendulum plan to differentiate itself from other DeFi platforms and attract users as well as developers to its ecosystem?

Torsten Stuber: Pendulum has a strong and unique position with its focus on fiat. As part of Polkadot it benefits from the security and synergies by this quickly growing network. Our goal is to become the central hub for stable coins and fiat tokens on Polkadot. We understand the importance of both great developer experience as well as user experience. We will implement a next generation smart contract system based on WebAssembly that makes it much easier to develop efficient applications – at the same time we will implement a system that allows for more traditional smart contract developers to deploy existing smart contracts that are compatible with Ethereum on our platform.

Ishan Pandey: I'd like to know your views on the implications of CBDC for the global economic system.

Torsten Stuber: I’m very excited about CBDCs. First, any innovation in the financial system will be beneficial to the end user whether it happens within the blockchain world or not. Generally, the emergence of CBCDs will be a driver for more innovation and applications. It will particularly reduce any friction between the fiat and DeFi world and Pendulum will play a major role in these developments.

Don’t forget to like and share the story!