The Qredo protocol is a Layer 2 decentralized custodian system that includes compliance and governance controls directly within its consensus mechanism. Sitting above Layer 2 is a Layer 3 decentralized communication layer that spreads messages to every peer immediately, while also providing built-in end-to-end encryption to protect privacy and security. Messaging can occur between machines, between machines and humans, or between humans.

Qredo’s view is that Layer 2 protocols can realize their full value when they rely on decentralized communication approaches, using a Layer 3 as a standalone layer to handle non-essential communications. This matters for any Layer 2 aiming to provide high-performing solutions for traditional finance participants that want to interact with or build their own DeFi protocols.

The Qredo protocol employs multi-party computation to create distinct deposit addresses and remove exposure to private key theft. MPC nodes authorize transactions using a consensus-driven process, secured without relying on centralized private key storage. The protocol is designed to follow the idea that the whole network functions as the vault, aiming to reduce counterparty risk for liquidity providers, market makers, and traders. Deposits and balances are mapped 1-to-1 to the corresponding Layer 1 blockchain and can be viewed via the Qredo block explorer.