Circle and Uniswap researchers jointly published a paper on January 19th that if fragmented financial sector (Defi) agreements were widely used in the foreign exchange market, rather than the current centralized system, the cost of remitting money would also probably be reduced by "up to 80 per cent".

The article entitled "chain Foreign Exchange and Cross-Border payments" was written by Uniswap big data engineer Austin Russell, Circle Chief Economist Gordon Liao, Mary Katherine Reid, Peter Perth and Wan Xin.

The author studies the trading activities of Circle dollar coins (USDC) and euro coins (EUROC) in Uniswap during the period from July to January 2022. It was found that the total trading volume of the coin was $128 million, with some days trading volume reaching $8 million.

During this period, the transaction price of stable currency USDC and EUROC is not so far from the wholesale price of US dollar and euro, the foreign exchange market rate is not many basis points. The author thinks that although the trading volume is relatively small, the Defi foreign exchange market provides a scientific and reasonable choice to replace the traditional foreign exchange with better price and high efficiency.

Related to:Defi certified public accountant made a net profit of US $40, 000 to identify vulnerabilities in the Uniswap system.

However, researchers want to know whether the application of Defi agreements such as Uniswap can save participants in the foreign exchange market. As a result, they elaborated on the traditional foreign exchange "agency banking" and the costs associated with Defi foreign exchange transactions.

They use the possibility of the World Bank to determine the price of remitting $500 according to the software of the global banking system. He then compares this with the cost of buying a stable currency (whether USDC or euro) based on the exchange, swapping it for another coin on Uniswap, sending it to another person, or having another person exchange it on the exchange.

The researchers concluded that the Defi approach can cause users to incur many different costs, including exchange royalties, Defi transaction fees, network fees and cash transfer to the exchange. Even so, according to the possibility of the World Bank, the service charge is too 80% lower than the average price of remittance.

Circle released the euro in June. According to Investopedia, the euro / US dollar is the most widely traded foreign exchange currency in the world.