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Crypto startup Hourglass released the first-ever marketplace to trade Time-Bound Tokens (TBTs) – a unique concept that tokenizes a user's staked assets in a decentralized finance (DeFi) protocol based on its lock-up time period.
The idea behind the marketplace is to allow users to trade their place in line for their locked up assets - essentially transferring a user's ownership of an asset that has been locked in a protocol to another buyer. "You can basically take a time bound token and then you can easily transfer ownership of it," said Charlie Pyle, founder of Hourglass.
Hourglass' marketplace launch comes as Lido's Version 2 deployment takes place this week. The startup will tokenize the Lido's withdrawal queue, which otherwise could "clog the exit path for weeks or even months," the company said in a press release. This will allow users to "trade their place in line" for withdrawal of their staked ether and gain liquidity in the meantime.
Lido currently holds the lead as the largest liquid staking platform in the DeFi space, with more than $12 billion in total value locked (TVL) across the Ethereum ecosystem, per DefiLlama.
How it works
In simple terms, through TBTs the marketplace will allow users to gain liquidity of their locked up assets by selling the rights of the time duration in a secondary market. "TBTs are a growing class of tokens that represent staked assets in DeFi protocols that are committed for a period of time," Hourglass said in a press release.
"Hourglass will support everything from the trading of locked frxETH [Frax ether token] to early exits from Lido’s withdrawal queue," the statement added.
As an example, if a user holds 10 Frax ether and stakes them into the Frax protocol for a month, the user will receive 10 TBTs - along with any staking rewards - that can be traded in the marketplace.
Like any secondary market, the platform will allow for a discount on the TBTs based on the duration of the locked-up asset. For example, a trader could bid for 3% discount on ether (ETH), that has a 10-month lock up period and the discount could change based on the time the asset is locked up for, said Pyle.
The TBTs will be issued by "Hourglass custodian smart contracts," and are semi-fungible tokens based on ERC1155s standard, Pyle said. Although the smart contracts are called custodian, the TBTs are non-custodial, so the founding team will have no control over the assets being deposited, Pyle noted.
Read more: What Is a 'Semi-Fungible' Crypto Token?
The locked assets – to which a TBT represents ownership – will be held through the custodian smart contracts, and at the end of a lock-up period, users can redeem their matured TBT for the asset, Pyle added.
Currently, Hourglass won't be charging any fees for trading on the platform.
Hourglass raised $4.2 million in a seed round led by Electric Capital, and includes investors such as Coinbase Ventures, Circle Ventures, Tribe Capital, hack.vc and other angel investors.