Solana The native decentralized exchange and Orca the lending protocol have merged to form Formation, a new platform focused on tokenized assets and capital formation and allocation in what is known as the “frontier economy”.

The merged company will combine the trading and liquidity infrastructure of Orca with the credit and treasury infrastructure of Loopscale. Loopscale, co-founder Luke Truitt, will serve as the Chief Executive Officer (CEO) of Formation, Mary Gooneratne will take on the role of Chief Operating Officer (COO), and Christopher Montagano from Orca will act as the Chief Strategy and Legal Officer.

Orca and Loopscale will both continue to operate as products under Formation. Existing positions, loans, treasury deposits, Whirlpool positions, fees, and rewards will all remain unchanged. No new tokens will be introduced as a result of this merger. The Orca and Loopscale protocols will form the foundation for the $ORCA and $xORCA token networks, where $ORCA represents the merged Formation ecosystem.

"Frontier economies are creating new business models, and the growth rate of financing needs has surpassed the evolution speed of traditional market infrastructure in providing services for them. Every major technological revolution is accompanied by a financial revolution. We are at a turning point, and capital markets must keep up with the pace of industries that are reshaping the economy," said Luke Truitt, CEO of Formation.

Merging and continuing the plan to promote a new growth phase of Orca

This merger follows closely on Orca's recent efforts to raise funds for a new growth phase. On September 29th, a DAO proposal sought to retain 80% of the protocol fees for development, allocate 10% for the repurchase of $ORCA to holders of $xORCA, and another 10% was allocated to a repurchase wallet controlled by the team.

The proposal also calls for the use of approximately 14.2 million $ ORCA, worth about 40.4 million US dollars, to support the acquisition, and at the same time transfers the $ SOL from the community treasury into the DeFi strategy. The proposal mentions the plan to acquire a “leading Solana DeFi protocol” and to add credit and revenue products, which aligns with the current merger of Orca with Loopscale.

Loopscale How will the points be handled?

This merger immediately sparked questions among Loopscale users. Over the past few months, they have been accumulating points in anticipation of a potential token issuance.

The documentation for Formation provides a direct answer: Loopscale will not issue its own token, and $ ORCA will serve as the token for Formation, including Loopscale as well.

However, these points will not disappear. Formation indicates that Loopscale points will be converted later this year, and the specific details will be announced soon. Before the conversion takes place, points will continue to accumulate.

This explanation addresses one of the biggest uncertainties surrounding the merger. Users who have accumulated billions of points will not lose these points just because Loopscale merges with Orca. However, Formation has not yet disclosed the conversion mechanism, nor has it explained how these points will be corresponded to within the $ORCA ecosystem.

Full-stack solution for tokenized assets

Formation aims to connect the various stages of the asset lifecycle that are currently scattered across different platforms. Orca provides liquidity through infrastructure such as Whirlpools, Riptide, and licensing pools. Loopscale offers credit through its order book, supporting fixed-rate loans and terms customized to assets. Its treasury products provide strategies that cover earnings, credit, and market-making.

These two platforms have currently reached a considerable scale. Orca has seen transaction volumes exceeding 550 billion US dollars since 2021, while Loopscale has facilitated loans amounting to over 2 billion US dollars and holds deposits of more than 150 million US dollars.

“Orca has been building deep liquidity for many years, and we have seen with our own eyes that liquidity alone is not enough to scale a asset. The greater challenge lies in establishing the necessary credit and distribution capabilities for these assets, and Orca and Loopscale have built complementary infrastructures. Together, we can provide issuers with a complete path from launch to long-term market adoption.” said Christopher Montagano, Chief Strategy and Legal Officer of Formation.

Formation The goal is to have "the lowest feasible assets".

Formation is targeting a structural issue in the traditional capital markets. A financing of 5 million US dollars may require almost the same underwriting, legal, services, and distribution infrastructure as a transaction worth 50 million US dollars. These fixed costs make it economically unattractive for smaller assets to issue securities. Formation refers to this threshold as the “minimum viable asset.”

The theory suggests that tokenization and on-chain infrastructure can reduce these fixed costs, allowing smaller assets and financing opportunities to enter markets that were previously economically unfeasible for them.

The company cited examples indicating that assets such as reinsurance, telecommunications debt, and tokenized credit could all benefit from this model.

Moving towards the regulated US market

Formation also plans to advance into the regulated U.S. capital markets. The company stated that it intends to operate a tokenized securities trading venue under the innovative exemptions of the U.S. Securities and Exchange Commission (SEC) and seeks the necessary licenses to expand its business.

Within the next 12 months, Formation plans to develop issuer tools, capital allocation strategies, credit infrastructure, market-making products, as well as new tokenized assets.

For the holders of $ ORCA, the direct impact of this merger is still unclear before more details are disclosed. A key question is how the Loopscale points will be converted, and whether this process will put pressure on $ ORCA. If Formation indeed chooses this path, another concern will be how quickly the project can increase its revenue to absorb or offset the potential supply that may enter the market. For now, both businesses will continue to operate as usual.