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Golden Observation丨Pantera Capital Partner: An article to understand the decentralized fixed-rate encrypted lending agreement



Golden Finance Blockchain, May 25th   In the past few months, decentralized finance (DeFi) has aroused widespread interest in the mainstream field, and more and more ordinary people have begun to try to explore various DeFi applications, and hope to use this user-oriented decentralized protocol to replace inefficient traditional financial products. At this stage, the fixed rate debt market plays a pivotal role in today's financial world, fixed rate loans occupy a considerable share in the global lending market, in this lending service, the interest rate remains constant throughout the loan term. Fixed rate loans are less risky due to the pre-set of known interest rates, thus attracting many use cases that are wider in scope, longer and less risky. Now, more and more people hope to "apply" this traditional financial product model to the encryption industry. To this end, Paul Veradittakit, a partner of Pantera Capital, specially wrote an analysis of the decentralized fixed-rate encryption lending agreement, let us take a look below. It is undeniable that most decentralized financial lending protocols on the market today provide variable-rate loans, which means that the loan interest rate will change during the loan term. The loan interest rate fluctuation range of some decentralized financial loan agreements even fluctuates between 2% and 65%. Due to this high volatility and low confidence in interest rates, floating rate loans are generally considered risky. Golden Evening News | List of important news on the evening of December 4: 12:00-21:00 Keywords: Mt. Gox, ETH options, US Treasury, North American investors, Ethereum 2.0, OMG 1. Mt. Gox civil lawsuit final Deadline is December 15th. 2. Reuters: North American investors are currently the largest buyers of Bitcoin. 3. The balance of the Ethereum 2.0 mortgage address exceeded 1 million ETH. 4. GBV acquired OMG Network, the second-layer expansion solution of Ethereum. 5. The 3iQ Ethereum Fund will be listed on the Toronto Stock Exchange. 6. 669,000 ETH options will expire on December 25. The biggest pain point is $400. 7. The U.S. Department of the Treasury wants regulators to pay attention to the “potential risks” posed by innovations in digital assets. 8. Report: The blockchain technology market is expected to grow by $8.07 billion between 2020-2024. [2020/12/4 14:02:07] Where there is a problem, there is a solution. Now for the cryptocurrency on the blockchain, a decentralized fixed-rate term loan agreement has emerged. Users can use stablecoins to borrow and lend funds to the protocol, or to provide liquidity. Moreover, the annualized rate of return provided by such agreements is generally very competitive, reaching 6-7%. Therefore, a decentralized fixed-rate encrypted lending protocol such as this is very promising to become one of the most important decentralized financial applications. Golden hot search-zce list: BHD tops the list: According to the data of Golden Finance and Economics ranking list, in the past 24 hours, BHD topped the list. The specific top five list is as follows: BHD, TRUE, XMR, STORJ, LEND. [2020/10/6] How does the decentralized finance fixed-rate lending protocol work Taking Notional Finance as an example, usually this kind of decentralized fixed-rate lending protocol will deploy several liquidity between native tokens and supported assets Fund pool, and support fixed rate loans using a custom automated market maker (AMM). Borrowers can withdraw assets from such an agreement, and in exchange they receive a negative balance of tokens in the relevant cryptocurrency (again based on a fixed interest rate). On the due date, the token balance will require the borrower to return an equivalent amount of the associated cryptocurrency to the protocol. When borrowers withdraw assets in a decentralized fixed-rate lending agreement, they generally need to set a maturity date. Unlike lenders, in exchange, they get a token negative balance, which is the same as the borrower’s Proportional to the total amount that must be paid at a fixed rate on the due date. After the maturity date, the token balance is essentially the basis for the borrower's obligation to provide an equivalent amount of the associated cryptocurrency. Likewise, lenders can deposit assets into such protocols, and in exchange, they can receive the native token tied to the cryptocurrency (also based on a fixed interest rate). At maturity, lenders can redeem these tokens for an equivalent amount of the associated cryptocurrency. Golden Strength Group|Dialogue with the Proposer of Chengdu Digital Asset Exchange Center: At 19:00 on May 19, Jinse Finance invited Duan Jiang, the proposer of Chengdu Digital Asset Exchange Center, and Peng Tao, CTO of Chengdu Jiukuan Technology, to be guests of the "Golden Strength Group" and share More development plans for the metropolis of Chengdu. Stay tuned! For more details, click the original link to view. [2020/5/19] Lenders generally set a maturity date after depositing assets into a decentralized fixed-rate lending agreement, and then receive native tokens associated with the value of the deposited assets. The amount of tokens that lenders initially receive is directly proportional to the amount of cryptoassets they deposited, that is, as long as the maturity date is on (or after), the lender can put the tokens in their holdings on a 1:1 basis. The proportion of the redemption is the initially invested cryptocurrency, and then you can get fixed interest income. Not only that, but native tokens are always created in "pairs", with one side being an asset (i.e. the lender token) and the other being a liability (i.e. the debit balance), meaning that the asset and liability net out to zero across the ecosystem . To facilitate the efficient exchange of these pegs, and tokens and associated cryptocurrencies, such protocols also use several liquidity pools. Each liquidity pool holds the native token and its associated cryptocurrency, which means that each liquidity pool corresponds to a specific cryptocurrency and a specific expiration date. Both the share of tokens and the amount of cryptocurrencies in the liquidity pool change as the maturity date approaches, in such a way as to match the rate corresponding to the fixed interest rate. Normally, to manage these liquidity pools, the protocol also uses its own automated market maker (AMM), with custom enhancements (such as dynamic curve sensitivity) to help stabilize rates and reduce slippage (reduce deposit or the effect of withdrawals on real interest rates). Golden Afternoon News| List of important developments at noon on March 4: 7:00-12:00 Keywords: India, Huobi, Samsung, Foreign Exchange Bureau 1. The Supreme Court of India will make a ruling on the central bank’s ban on banking encryption business today; 2. Li Lin of Huobi: He does not hold shares in third-party companies other than the companies he controls and operates; 3. Samsung SDS cooperates with the payment platform Credorax to carry out blockchain payments; 4. Zhang Tiecheng of the State Administration of Foreign Exchange: Will promote the construction of cross-border blockchain credit Service system; 5. Beijing's first blockchain electronic ordinary invoice was issued in the parking lot of Hanwei International Plaza; 6. Coinbase CEO: The stock market decline and interest rate cuts may lead to the growth of the encryption market this year; 7. Let's Encrypt software bugs lead to 3 On March 4, 3 million certificates were revoked; 8. BTC is now at $8,786.79, an intraday increase of 0.42%, and the top ten mainstream currencies all rose. [2020/3/4] Usually, such agreements will support several stable currencies for lending and provide liquidity. During the loan period, the lending interest rate is fixed. However, the loan interest rate will also vary depending on the loan size, the selected basic stable currency, and the length of the loan period. It is worth mentioning that some decentralized fixed-rate lending protocols have also launched a new use case in the field of decentralized finance - fixed-rate lending services. The service has been welcomed by many users, especially those who are risk-averse and do not want to take on long-term debt. In addition, some fixed-rate loan applications have been launched on some agreements, mainly including: providing early and sustainable liquidity for new DeFi projects; providing funds for low-risk and low-return trading strategies; using encrypted assets to pay off houses Personal use such as mortgages. Exclusive | Jinse Finance’s February 24 mine coin data broadcast: Jinse Finance reported that according to the data of Coinin Mining Pool: the daily income of mainstream coin mining is: BTC (¥1.14/T), ZEC (¥0.45/T), LTC (¥23.26/G), BSV (¥1.25/T), BCH (¥1.25/T), DASH (¥0.13/G). The current popular mining machine data and net income are: Innosilicon T3+ (BTC, ¥32.83), Innosilicon A9 (ZEC, ¥16.94), and Antminer L3+ (LTC, ¥3.74). [2020/2/24] This fixed-rate fixed-rate fixed-term decentralized lending protocol has been widely used since its release. The value of locked positions in some agreements has even exceeded tens of millions of dollars, and the loan funds processed have also reached the level of millions. Decentralized fixed-rate lending vs. centralized finance fixed-rate lending We know that in the traditional financial model, people need to use fiat currency to hold and exchange loan assets, while encrypted lending institutions based on the "centralized finance" model use is a cryptocurrency. At present, there are already some encryption projects on the market that provide users with fixed-rate encrypted loan services through the "centralized finance" method, in which lending institutions have effectively played a role, and their role is very similar to that of a central bank. However, there are still some key problems with encrypted lending protocols based on the "centralized finance" model, such as: low accessibility (similar to most current traditional banking services); poor transparency; huge counterparty risk ( Any one lending servicing agent may default in a financial transaction). Therefore, those encrypted loan agents based on the "centralized finance" model may have default risks in financial transactions. There are big differences between decentralized finance and centralized finance, especially decentralized fixed-rate lending agreements, which usually have the characteristics of transparency, automation, and liquidity. Through decentralized lending services, counterparty risk can be significantly reduced. In addition, both lenders and borrowers have full predictability of how funds are used, and lending rates and parameters are usually controlled by user communities rather than central institutions. Fixed-rate loans vs. variable-rate lending Currently, the total size of the U.S. debt market is estimated at $46 trillion, and the total size of the global debt market is estimated at $128 trillion, compared to the outstanding debt of decentralized finance lending protocols The total is only about $19 billion. The opening article also mentioned that outside of the field of decentralized finance, most debt markets are driven by fixed-rate loans. A fixed-rate loan is a loan provided at a fixed, unchanging interest rate. Since this loan contract allows lenders and borrowers to have more confidence in their borrowing and repayment, it can reduce risk and allow long-term strategies and leveraged trading positions, which is why fixed-rate loans dominate countless classic finance use cases. In the field of decentralized finance, most lending agreements provide loans with variable interest rates, and the interest rates of related lending products may change at any time during the loan period. If you want to use these lending agreements, you can only hold or exchange encrypted assets. Therefore, once the cryptocurrency market fluctuates, it will usually cause a huge fluctuation in the interest rates of these lending products, which will further amplify the risk of variable interest rate loans. If you want to obtain long-term investment returns through decentralized financial lending, then this kind of variable interest rate lending product is actually not reliable, and the extremely high volatility is not suitable for ordinary investors who are looking for low-risk and reliable investments. what they expected to see. Therefore, only if the lending agreement provides fixed-rate lending services can more traditional non-crypto users be attracted and the scope of use cases expanded. Only in this way can cryptocurrencies be better applied to the financial debt market. Loan Use Cases in Decentralized Finance The fixed-rate encrypted lending protocol in decentralized finance has been welcomed by many users, especially those who are risk-averse and do not want to take on long-term debt. For example, traditional lending institutions are one of the beneficiaries. These institutions pay their customers a return at a fixed rate, so they usually prefer to borrow at a fixed rate. Floating-rate loans could hurt these companies' profit margins and introduce significant risks into their business models. In addition, trading firms also prefer to borrow at fixed rates rather than floating rates, as this model can fund more reliable and low-return trading strategies; while fixed rates may have lower expected returns, highly volatile rates may It puts the company at risk and cannot ensure profitability. We’ve also seen that DeFi projects in dire need of liquidity may also seek out fixed-rate loan products instead of liquidity mining. Through liquidity mining, decentralized financial projects must return rich returns to liquidity providers in a relatively short period of time, but the specific results depend on whether the project can be successful. Once problems arise, such returns may become impossible Ongoing, even out of pocket, while fixed-rate loans guarantee long-term project responsibilities and obligations. Of course, cryptocurrency holders who need liquidity may prefer to borrow crypto assets at a fixed rate rather than sell their crypto assets outright and lose their position. Fixed-rate lending products allow such holders to explore greater investment opportunities, with the flexibility to fund them using their cryptocurrency holdings, and at much lower risk. It is reported that some users directly obtain fixed-rate loans from the fixed-rate encrypted lending agreement to repay all their mortgage loans. Summary Globally, decentralized finance is capturing more financial ecosystem market share. In this process, platform-based fixed-rate encrypted loan products are crucial. For the fixed-rate debt market, such protocols actually provide a very promising model, allowing users to borrow and lend cryptocurrencies with lower risk than ever before, while also greatly expanding the range of DeFi use cases . Undoubtedly, in the future, the share of decentralized finance in the global financial ecosystem will become larger and larger, and the fixed-rate loan agreement will continue to improve. For example, the maturity date that can be set will be longer. There will be more types of collateral to choose, and the returns that can be provided to liquidity providers will be better. It is believed that as the cryptocurrency market continues to grow, the decentralized fixed-rate loan agreement will unlock more new encrypted financial use cases and bring better returns to investors.


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