PRESS RELEASE. Lendefi is a brand new protocol that aims to provide opportunities such as borrowing and borrowing, leverage and investment.
Lendefi is an innovative second-generation DeFi loan protocol that allows lenders to earn interest on stablecoin deposits and for borrowers to obtain under-collateralized loans (UCLs) to invest in popular digital assets.
The main advantage of Lendefi is the possibility of collateral loans, which means that you can borrow more than the collateral (which serves as a type of security) you provide. Existing lending protocols, in turn, allow for over-collateralised loans, which means that when borrowing, users are limited to less than the value of the collateral. The sample scenarios below illustrate the difference.
• Collateralized: You can provide collateral worth $ 50,000 and borrow another asset worth more than $ 50,000.
• Overcollateralized: You can provide collateral worth $ 50,000 and borrow another asset worth less than $ 50,000.
Collateralised loans allow the borrower to utilize their available capital while pursuing investment opportunities that were previously unattainable. Obviously, this will make digital assets intriguing for investors used to accessing such mechanisms in traditional markets.
Lendefi versus connection
Since collateralised borrowing is the main point of divergence compared to other loan protocols, the mechanism for ensuring the trust of both parties is different. While Compound allows for borrowed assets to be withdrawn, and thus requires overcollateralization to protect the lender from default, Lendefi keeps the collateral in escrow within the protocol.
While the interest rate that Compound offers is variable, Lendefi offers a flat rate for borrowers and keeps it variable for lenders. Interest rates are periodically updated by the DAO. Because borrowing costs are predictable and thus easier to integrate into risk management processes or trading calculations than variable interest rates, borrowers will likely find Lendefi attractive.
Compound and Lendefi’s interoperability gives users the ability to borrow with a wide variety of assets. For example, a borrower could use Compound to obtain an overcollateralized loan for USDC with BAT as collateral, then use USDC on Lendefi to take out a secured loan to invest in wBTC. This interoperability can itself be deployed as a third-generation protocol.
While the mechanism for ensuring trust between borrowers and lenders differs between Compound and Lendefi, they are based on the same principles of governance and restriction to popular assets.
Both protocols are managed by a decentralized autonomous organization (DAO) that allows full community and stakeholder control over the protocol.
Limited to popular digital assets
Both protocols are limited to popular digital assets. In the case of Lendefi, the selection is based on the Uniswap liquidity and more digital assets can be added as per the decision of the Lendefi DAO, as with the DAO of Compound.
Lendefi is a game changer
Each protocol offers different use cases. By enabling lenders to earn interest on stablecoin deposits and giving borrowers access to attractive collateral loans, Lendefi can make a giant leap forward in a fast-growing industry.
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