Islamic Development Bank & Settlemint Collaborate for Blockchain Price Stability

Today, a profound revelation in the world of financial technology comes to the forefront. Settlemint, an enterprise blockchain developer with a solid portfolio of over 60 projects and recently raising a commendable $16 million in funding, has partnered with the Islamic Development Bank Institute (IsDBI). Their shared goal is the development of a ‘Smart Stabilization System’ (SSS) – a trailblazing idea that uses smart contracts in an attempt to counterbalance the infamous volatility of market-based assets, particularly focusing on financial and digital currencies.

This revolutionary venture aims to challenge the erratic, often capricious nature of short-term market swings. Think of it as a financial pendulum – the erratic movements can cause drastic crashes that sometimes become so severe that governments are forced to intervene, leading to inevitable taxpayer costs. But what if there’s a different approach? This is where the Islamic Development Bank, a development finance institution, steps in. Venturing into an alternate route, they intend to explore the possibility of a stabilization algorithm that manages “the gap between supply and demand to reduce the volatility of the price.”

While details are currently scant, we can make an educated guess. Likely, the smart contract will automatically act as a kind of financial autopilot, buying when buyers are absent, and selling during a seller’s drought. If it doesn’t own the asset, it might need to borrow it first. This suggests that, at least in theory, it will buy low and sell high. Although the practical application might not always align with theory, it’s fascinating to note that this is why the SSS is considered to be self-financing.

Of course, with such a system, there’s a certain level of risk associated with traders potentially gaming the system if they have access to its inner workings. This risk is no doubt being scrutinized and is presumably one reason for the pending patent.

Dr. Sami Al-Suwailem, the Institute’s Acting Director-General, pointed out the rapidly evolving landscape of financial transactions. He emphasized the need for a robust stabilization system to mitigate the instability that comes with swift fund movements, as highlighted by recent banking crises.

Settlemint, headquartered in Belgium, is not just a trailblazer in enterprise blockchain development. They also offer low-code middleware that empowers corporates to deploy blockchain applications swiftly on various public or permissioned blockchains. With notable partnerships like Fujitsu for track and trace solutions, Settlemint is setting its course in the grand odyssey of digital finance.