Crafting Finance is a synthetic asset issuance protocol and contract trading platform running on the Polkadot contract chain. It relies on DOT, KSM, BTC, ETH, and the CRF produced by the project as collateral, and it can synthesize on-chain and off-chain assets-such as stocks, bonds, and gold-using smart contracts and oracles.

Participants can create a specific synthetic asset, referred to as RAFTs, including U.S. dollars, by locking DOT, KSM, BTC, ETH, or CRF as collateral. This collateral automatically establishes a long position in the chosen asset. Through the trading platform, users can exchange the minted assets for other assets to support strategies such as shorting one asset while going long on another. The minted assets represent the system’s liabilities, and the share of each user’s liabilities is set at the time of collateralization, enabling the calculation of their corresponding profits. Since this design uses a collateral pool and does not rely on a counterparty, it addresses liquidity and trading depth challenges common to DEX.

The system’s key functional modules include: forging synthetic assets (Forge), decentralized exchange (Kingsman), collateral pools, fee pools, oracles, and the Polkadot bridge.

Forging Synthetic Assets(Forge)

All synthetic assets issued by the system are created by users by staking eligible collateral. The initial collateral set comprises CRF, DOT, KSM, BTC, and ETH, and the required collateralization level depends on how the collateral value changes. Looking ahead, community governance can modify the collateral and collateralization ratio. When users stake collateral and forge synthetic assets, the act creates matching debt positions. To withdraw or unlock collateral, users must repay the debt-meaning they destroy the synthetic assets previously generated.

RAFTs

Currently, RAFTs (assets synthesized by directly staking collateral) fall into four categories: stablecoins (RaftStable), simple synthetic assets (Raft), custom synthetic assets (UnivRaft), and synthetic bonds (BondRaft).

Stablecoins (RaftStable)

Stablecoins are an important part of synthetic assets, including rUSD and rEuro, which can be used as the system’s denomination currency for contract trading. Stablecoins can also be used for collateral lending. Users can borrow stablecoins such as rUSD and swap them into real-world dollars.

Simple synthetic assets (Raft)

Simple synthetic assets include cryptocurrencies like rBTC and rETH, stocks such as rAAPL, gold such as rXAU, and other real-world assets.

Custom synthetic assets (UnivRaft)

Custom synthetic assets allow users to issue any kind of financial contract through the system, enabling the development of financial derivatives and bringing the full range of real-world assets into the protocol.

Synthetic bonds (BondRaft)

Synthetic bonds are interest-bearing synthetic assets issued by the system.

DEX (Kingsman)

This is an exchange for converting different synthetic assets and for contract trading. Because of CF’s design approach, this DEX does not involve a counterparty, so it avoids concerns related to transaction depth.

Other components

Collateral Pool

The collateral pool is the combined total of synthetic assets generated by all users. Along with each user’s generated synthetic asset amounts, it also tracks each user’s share of the debt. When new synthetic assets are minted, the system must recalculate the overall debt ratio.

Fee Pool

Trading or converting synthetic assets on the DEX charges transaction fees. The fee ratio is tentatively set at 0.3%, and all fees flow into the fee pool. Fees are collected in rUSD and distributed to users in proportion to their debt share. The system specifies that only users whose collateral is CRF can receive rewards to incentivize CRF holders. Because the CRF price can fluctuate, only users who satisfy the collateralization ratio are eligible for rewards.

Oracle

Since contract trading prices need to be sourced externally, the oracle is a critical component of the project. At the start, the system will use centralized oracles supplied by the project team, and later it plans to bring in additional, more secure decentralized oracles.

Goal

This project aims to deliver a decentralized virtual asset issuance platform and contract trading platform. In the long run, it is intended to replace the perpetual/futures contract capabilities of major centralized exchanges, and it can also enable protocol-level issuance of any asset type to contribute to the traditional financial market.

Advantage

Centralized contract exchanges have revealed growing numbers of issues, and the broader industry needs a solution for decentralized contract exchanges. The project’s decentralized contract trading approach keeps the openness and transparency associated with standard DEXs, supports anti-censorship, and does not require KYC. Additionally, because the system does not rely on a counterparty, it addresses common DEX problems around liquidity and transaction depth. For these reasons, the project believes it has broad prospects as a genuine DEX solution.