/biz/ - Business & Finance

So if you're a major bank who currently clears your derivatives and securities instruments through a CCP, you have to contribute to a default fund. A default fund is basically just money held by a CCP as insurance against a member defaulting on a contract. All the CCP member banks pay into the default fund and if one of the banks defaults on a contract then the insurance is paid out of the default fund. All the member banks are then expected to replenish the default fund at their own expense.
In a smart contract derivatives system there is no need for a default fund. There is no need for counterparty insurance because there is no counterparty risk. I couldn't find figures for how much money is held in default funds (it's part of a bank's balance sheet so I imagine they don't make it super public, although if an autismo wants to dig up some figures that would be great) but I think it's safe to say that this form of collective insurance is worth billions if not tens of billions of dollars worldwide.
And under a smart contract powered solution all of this money is completely liberated back to the banks. This is just one aspect of the reduced reliance on CCPs afforded by smart contract powered systems, and already it is to the tune of billions and billions of dollars.