The new protocol has sprung up, and the dark horse player "DANK Protocol" wants to use "fixed interest rate" to subvert the existing DeFi pattern
After experiencing the dilution of hot spots such as NFT prosperity and the return of big pies, the attention of the DeFi season finally returned strongly in September.
In terms of data, the total lock-up volume of DeFi once exceeded 180 billion US dollars, setting a record high. Among them, the total amount of deposits and loans in the DeFi lending agreement has successively exceeded 70 billion US dollars and 30 billion US dollars, setting new historical records one after another.
From the perspective of participants, the head effect is already very obvious. Protocols enjoying the first-mover advantage, such as Compound, MakerDAO, and Aave, are carving up the largest share of the top DeFi lending market.
However, in such an early decentralized financial market, the top position of DeFi lending is not unchanged, and there are still a steady stream of latecomers in the market trying to grab the cake in the hands of the big brothers.
Recently, a wave of "fixed interest rate" is blowing in the DeFi circle.
The new generation of DeFi protocols are trying to use "fixed interest rate" to achieve differentiation, and to achieve sudden emergence with the help of innovation in gameplay. Such as Anchor, Yield, Pledge, etc. are all new players on this track.
Recently, Odaily discovered an open source lending protocol DANK Protocol (hereinafter referred to as "DANK Protocol") based on Ethereum smart contracts.
The DANK protocol can be like traditional DeFi such as Compound and Aave, allowing users to realize deposit and loan operations through wallets; in addition, the DANK protocol also tries to introduce a new model of "fixed rate market" on top of the traditional gameplay of "floating rate". To solve the inefficiency of funds in the DeFi market.
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01. How to use DANK agreement loan?
The DANK protocol has designed three main participating roles of the depositor, the borrower and the liquidator in the lending link.
depositor:
Deposit users can deposit their encrypted assets into the agreement, and automatically earn income according to the real-time loan demand in the market.
In addition, depositors can also claim their own deposit income at any time - deposit interest and DANK governance tokens, and can also withdraw deposits back to their Ethereum wallets at any time.
Borrower:
Borrowing users can borrow in the market only after they pledge assets (such as ETH) as collateral. In terms of fees, the borrower needs to pay the interest fee based on the loan interest rate, and the Ethereum gas fee for initiating the transaction.
What is more considerate is that the DANK protocol sets an 80% limit, which means that the borrower can only borrow up to 80% of the target asset. In addition, the DANK protocol also designed the loan repayment function for the borrower, which can realize the repayment operation between different accounts.
Liquidator:
The liquidator mainly earns income by helping the borrower restore the positive liquidity of the account during liquidation.
When the borrower’s account has negative liquidity due to a decrease in the value of collateral or an increase in the value of borrowed assets and liquidation occurs, the liquidator will repay part or all of the loan on behalf of the borrower to help the liquidity of the borrower’s account return to positive.
For example, suppose the borrower Xiao Mo mortgaged 100 ETH of assets to lend USDC worth 50 ETH. When the huge fluctuation of the spot price triggers the liquidation of Mo’s account, the liquidator can repay up to USDC worth 25 ETH.
In return, the liquidator gets a 10% collateral reward from the borrower. In other words, at this time, the liquidator will get 2.5 ETH in return by repaying USDC worth 25 ETH.
In fact, in terms of the design of the lending mechanism, the current mainstream DeFi protocols are almost the same. Why can the DANK protocol be praised as "the new protocol application that is most likely to completely change the DeFi market"?
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02. Find new incremental ideas from "fixed interest rates"
A point of view was mentioned in the previous forecast of the blockchain research company Blockdata-"If the world's largest 100 banks invest in DeFi, even experimental investments, there may be an influx of US$1 trillion."
In other words, providing DeFi services to institutional users in the traditional financial circle will be a trillion-dollar market.
If new DeFi protocols want to compete with Maker and Compound in the stock market, it will be difficult to break through the moat of the former.
The incremental story in the market outside the circle is much sexier.
To get out of the circle and form greater potential, you have to attract oldmoney from the traditional world to enter the market. But how can these hot money from the traditional financial circle flow into the decentralized ecosystem of DeFi?
The story of DeFi breaking through the circle has been told for a year, and the clarion call to break into the traditional financial circle has already sounded. The traditional financial circle has not made a large-scale entry for a long time. The biggest obstacle is various "uncontrollable risks".
"Floating interest rate" is a common choice of mainstream DeFi lending agreements. In this model, users mainly obtain floating income by providing liquidity.
However, instability and high volatility are not a good thing for traditional financial institutions that prefer stable investments and are eager to accurately predict investment returns.
In addition, the "floating interest rate" has also brought about the thorny problem of low capital utilization. Previous data mentioned that in the two top DeFi projects of Aave and Compound, the capital utilization rate is less than 50%.
At this time, it may be a good shortcut to use a set of models more familiar to traditional financial players.
Therefore, since the beginning of this year, the fixed interest rate model has also been frequently favored by practitioners, and has become a major direction of new agreement innovation.
After all, for institutional users in the traditional financial circle, fixed interest rates are the most common type of loans and have been used for many years.
In the current new agreement, we can also see a variety of "fixed interest rate" gameplay. For example, Pledge introduces non-standardized NFT to represent fixed interest rates, allowing users to loan or borrow at fixed interest rates within a certain period; UMA issues dollar tokens with yields and waits.
What are the highlights of Dank Protocol's solution "Fixed Rate Market"?
According to the official disclosure documents of the Dank protocol, it can be seen that Dank's fixed-rate market ("fixed-income market") is known as the best tool for users to obtain stable risk exposure.
The main implementation mode is that users can release the forward income of d-token at any time based on the floating rate market, and users can choose two different modes of order book and AMM automatic market making to manage their own fixed income.
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03. Supported by popular concepts of Layer2 and NFT, DANK will be a new DeFi application in the Web 3 era
Among the nearly US$180 billion DeFi asset mortgage records created by users across the network, Ethereum, as the largest DeFi public chain, has won a TVL (total locked value) of US$130 billion.
Ethereum is the promised place for all DeFi protocols, but it is undeniable that when multiple hotspots such as DeFi, NFT, and GameFi broke out, the gas fee and long transaction confirmation time have made users miserable.
Recently, when the mainnet was launched, the Layer 2 expansion solution Arbitrum’s lock-up volume increased savagely, skyrocketing to 1.5 billion U.S. dollars. The DeFi circle also experienced several migrations to Layer 2.
Ethereum has undoubtedly become the mainstream public chain in the DeFi world, but expansion is imminent. Going to Layer 2 is the general trend of the future DeFi industry.
While Dank Protocol chooses Ethereum as its main position, it is also actively exploring new hotspots in the industry, Layer 2 and NFT.
Odaily noticed that at the end of August, shortly after the Dank protocol opened the Beta test to the public, the Dank protocol chose to test NFT on Matic (Polygon), a second-layer expansion solution on the Ethereum chain. Users who participate in testing feedback questions.
The Polygon chosen by Dank Protocol is the best among many Layer 2 expansion solutions. Recent market data shows that since OpenSea integrated the Polygon solution, the number of users of OpenSea trading on Polygon has exceeded the number of users on Layer 1 of Ethereum.
From the sharing of Twitter users, we can see that DANK-NFT are different pixel cartoon characters.
In addition, the combination of NFT and DeFi has always been a hot topic in the circle. Fragmented NFT and NFT mortgage lending are two commonly discussed directions.
However, in the innovative solution of the Dank protocol, NFT is mainly used to create credit identities on the Web 3.0 chain.
Although these DANK-NFTs are of little value at the moment, the ultimate goal of DANK-NFT is to become the credit certificate and unique ID on the future DANK protocol. According to the DANK protocol team, in the future, users are expected to realize unsecured loans through DANK-NFT credit certificates.
In the opinion of the Dank team, with the development of the DANK protocol and the growth of the community, DANK-NFT will be released to more scenarios and applications. The imagination includes but is not limited to: credit identity on the chain, image upgrade, game ID, voting governance.
Behind the DANK protocol is a small and capable team, and the team members have many years of experience in the blockchain field.
Its co-founder, Philx Peng, is an early investor and participant in the DeFi field, and has in-depth research and understanding of DeFi protocols. Prior to this, Philx Peng also had many years of entrepreneurial experience in the exchange field. CFO Amber graduated from the London School of Economics and Political Science with an ace undergraduate major in accounting and finance, and worked in the consulting company Eston.
At present, DANK has been connected to the four major DeFi wallet applications of Metamask, Ledger, WalletConnect, and CoinbaseWallet, and the DANK protocol has also been protected and audited by many well-known audit institutions in the industry. DANK Protocol's mainnet will be officially launched on September 29.
The completely open source model adopted by the DANK protocol is allowing more people to participate in the ecology of the DANK protocol. It is foreseeable that more third-party applications and protocol products of the DANK protocol will appear in the future to enrich the functions and ecology of the DANK protocol.
From the first outbreak in July 2020, to the highlight moment in March this year, to the gold-absorbing effect that is hard to subside now, DeFi is still the biggest outlet in the currency circle in 2021. We have reason to believe that in DeFi, Layer2, NFT Under the packaging of multiple concepts, DANKProtocol may really become the explosive application in the new DeFi protocol.
