Modern day financial systems are built upon the fungibility of financial instruments. A lack of fungibility can create a liquidity squeeze. Fungibility entails the very nature of breaking something into smaller parts. For example, an asset can be broken down into components that make up its fundamental characteristics such as a stock that pays a recurring dividend stream. Hencer, an asset can then be replicated by putting together the individual required functional parts. This is essentially the idea behind the Modular Financial Contract Protocol (MFCP). In most protocols assets are created from scratch and a new smart contract is created newly time and again. MFCP, however, replicates the fundamental characteristics of an asset by putting together a set of pre-existing modules as the building blocks of a smart contract. This process is highly scalable and allows for a fast and easy replication of essentially any fungible asset on the blockchain. Complexity and time to market are drastically reduced.
MFCP entails a set of building blocks (think of Lego bricks) to replicate a broad range of assets in digital format (so-called Digital Assets). The high level of customizability permits the creation of custom assets serving a specific purpose. The modular nature of MFCP enables the replication of the behaviour of an asset or instrument over its lifetime. For example: a debt instrument has a different life cycle from a common or preferred equity instrument. Instrument characteristics also differ across regulatory regimes.
MFCP models the entire life cycle of an instrument from creation to dissolution and each aspect of life cycle management is associated with a specific module, which is specific to an asset. Hence, MFCP facilitates the replication of complex instruments with modules being leveraged across different types of instruments.