DeFi Lending and Borrowing Platform

1. DeFi Explained

DeFi (pronounced dee-fye) is short for decentralized finance. It’s an umbrella term for the part of the crypto universe that is geared toward building a new, internet-native financial system, using blockchains to replace traditional intermediaries and trust mechanisms.

DeFi took off in the summer of 2020 – when borrowing and lending platforms introduced their native governance token, which is used to reward its users in a process known as liquidity mining, thus making DeFi the premier use case for blockchain technology in general.

Some of the most popular use cases of DeFi currently are the lending and borrowing platforms, decentralized exchanges and automatic market makers, derivatives, and tokenization platforms.

2. What We Offer?

Our team offers creation of custom lending protocols designed to accommodate your particular use cases and business objectives. Based on your needs, we can cherrypick certain features from the existing lending protocols and go several steps beyond by introducing innovative features which can position your product in the market, making it unique.

3. Prominent DeFi Lending protocols

The biggest lending protocol in terms of total value locked (TVL) is the AAVE protocol, which at the time of this writing has over USD 16 billion TVL, across 7 networks and 13 markets. Additionally, AAVE v3 is one of the most sophisticated and feature-rich lending protocols, which in addition to offering lending and borrowing in over a couple of dozen tokens, also has robust risk management and capital efficiency features. AAVE enables the users to earn APY by depositing their tokens in over a dozen of markets as well as it allows the users to borrow overcollateralized loans. It has an additional staking mechanism where the users can stake their AAVE tokens to ensure the safety of the protocol in general, and in return, the users generate APY. Furthermore, AAVE has a governance mechanism that allows AAVE token holders to make decisions on the future direction of the protocol, risk parameters, and other changes or upgrades to the protocol, making it a truly decentralized system. Portals: In addition to the above features, the Aave v3 introduced portals – a feature that allows the flow of liquidity between Aave V3 markets across different networks. This feature has the potential to generate a number of use cases, such as borrowing on one chain but repaying the loan on a different chain. E-Mode: The next feature is the High-Efficiency mode (E-mode). The E-mode allows borrowers to extract the highest borrowing power out of their collateral when supplied and borrowed assets are correlated in price, particularly when both are derivatives of the same underlying asset (e.g., USDC, USDT, and DAI).

The Compound is another popular lending protocol which was the primary reason that started the DeFi summer after introducing its COMP governance token. Compound currently has over USD 4 billion worth of locked assets and operates on Ethereum Mainnet. Compound allows simple lending for generating passive income (APY) for the users that deposit their funds and allows overcollateried borrowing. The Compound also has a decentralized governance system where the COMP holders take part in the decisions for protocol upgrades, risk parameter updates, etc.

The primary value-add of MakerDAO is the creation of crypto collateralized stable coin, pegged to USD. This means the system can run completely from within the Ethereum blockchain without relying on outside centralized institutions to back, vault, and audit the stablecoin. MakerDAO is a two-token model where a governance token MKR yields voting rights on the platform and participates in value capture. The second token is a stablecoin called DAI – a staple token in the DeFi ecosystem with which many protocols integrate, including AAVE and Compound. DAI is one of the most robust algorithmic stablecoins in the market, which is backed by collateral (ETH) which ensures its stability.

Users generate DAI by locking their ETH in a smart contract which enables them to mint DAI worth up to 2/3 of the locked ETH. When the user returns the debt, which can only be done via DAI, the returned DAI tokens get burned, and the ETH gets released.

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4. Advantages of Using Blockchain for Lending Platforms

Transparency

Smart contracts are deployed in blockchains, which make them inherently transparent for the users to scrutinize. Thus the exact rules encoded in the smart contracts of each DeFi lending protocol are freely available and auditable. In addition, users’ interactions with protocols are recorded on the blockchain introducing an immutable record of all transactions.

Decentralized Governance

Absent a central authority, users vote on amendments and updgrades to a protocol based on their holdings of native protocol tokens. In particular, governance tokens that are issued by many of these protocols to users give proportionate voting rights to those who have economic stakes in these platforms. This enables the platforms to align their long-term interests with the users.

Liquidity

Funds supplied to a lending protocol are pooled together and can be utilized efficiently. Thanks to smart contracts and blockchain, lending, borrowing, and arbitraging can all be performed inexpensively and almost instantaneously.

Dis-intermediation

There are no central entities or intermediaries that can intervene in the lending and borrowing process of the users, thanks to the fact that the platforms are operating based on the pre-determined set of rules encoded vis smart contracts.

Trustlessness

Lenders do not need to trust borrowers’ solvency anymore, as ingeniously designed smart contracts enforce liquidation when default risk is present.

Agility

DeFi lending protocols can based on the formulas encoded via smart contracts, programmatically update interest rates and ceaselessly reflect the latest supply-borrow balance of the market.

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5. Product Features

Lending and borrowing

The product will have a dashboard page that can be used by the users to seamlessly deposit funds and borrow based on their collateral deposited on the platform.

Integration of several crypto-wallets

The product can have the following wallets integrated into the platform as wallets Metamask, WalletConnect, Coinbase, Torus, Frame.

Staking Module

The platform will enable adding a safety module where the users will stake their platform tokens and earn APY and platform fees.

Governance module

The platform will have a governance module that is based on DAO (Decentralized Autonomous Organization) model enabling the stakeholders to take part in all the decisions related to the development of the protocol

Reward mechanisms

The platform will enable the introduction of certain rewards and incentives for encouraging lending and borrowing in certain markets

Information page

The platform will have an information page where the users can access the GitHub and the documentation of the platform to learn all the features of the platform

Robust Features

The platform will support isolation mode, high-efficiency mode, supply and borrow caps, granular borrowing power control, price oracle sentinel, variable liquidation close factor, and a number of many other features that you need.

6. Integration of Blockchains

We can assist having the lending protocol deployed in a wide variety of EVM compatible blockchains and L2s:

Ethereum

Avalanche

Polygon

Binance Smart Chain

Fantom

Optimism

Arbitrum

Harmony

7.Steps for Product Development

Confirmation of the project requirements

Confirmation of the UI/UX design of the platform

Development of the test version of the product

Audit of the smart contracts to ensure their security and stability

DeFi Lending and Borrowing Platform

1. DeFi Explained

2. What We Offer?

3. Prominent DeFi Lending protocols

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