Decentralized finance (“DeFi”) is a term that refers to the countless applications of crypto technologies.
What is common to all of them is the mission to bring about gradual development after a full blown transformation of existing centralized financial structures.
This will begin by reducing the reliance on intermediaries on which the centralized financial infrastructure has evolved to rely.
In the next article, we will look at the most interesting projects that aim to make good use of DeFi liquidity in the most original and bold ways.
An avalanche of decentralization – BENQI
As a decentralized, highly scalable and open-source blockchain, Avalanche is stealing the spotlight not only as an alternative to Ethereum, but as a hotbed for lucrative projects built on top of it.
BENQI is a decentralized native liquidity market protocol that seeks to streamline the process in which digital assets can be used to borrow, lend and earn interest.
At the heart of the project is the platform which comes with a dedicated lending and lending market and liquidity stake option.
The platform has a QI native token that is available for mining as part of a liquidity pool on decentralized exchanges.
An alternative option is to use the QI token pool which is supported by the BENQI protocol. As a reward for providing liquidity to BENQI, users are entitled to both QI and other tokens.
Also, the lending and lending market makes it possible for users to earn passive income by providing liquidity.
Similarly, borrowers can offer loans through over-collateralization of assets.
Liquid staking is supported by allowing users to stake AVAX tokens on Avalanche C-Chain.
When it comes to managing capital as part of the DeFi ecosystem, staking assets are tokenized, which allows users to diversify their options.
By its design, BENQI is leading the charge in attempting to turn Avalanche into a platform of choice for all future efforts involving DeFi.
It hopes to attract users with the promise of lower fees and wider access to decentralized financial products.
Gluva – Financial Inclusion for All
Gluva is a financial platform developed with the goal of breaking boundaries. Yes, symbolically and literally, as its mission statement includes a promise to provide as many stakeholders as possible the widest possible access to a healthy currency.
To achieve this, Gluva Invest gives bond investors 12% APY on the loans they provide, while the loans are used to provide unbanked people in emerging markets with access to much-needed credit lines.
Yes, the reason is good, but what about the model?
The Gluva team seeks to integrate other DeFi lending protocols by focusing on creating a decentralized lending infrastructure for non-collateralized lending.
To achieve this, Gluva recently kickstarted the Premier Crypto Native Venture Debt Fund which aims to promote financial inclusion and attract retail investors with the promise of a fixed APY.
With Gluva, liquidity is managed by pooling staking funds and providing this liquidity to all participants in its ecosystem.
Users are given the opportunity to earn part of the collective interest from the liquidity pool. From this, credit arrangements can easily emerge for a range of users, including unbanked or underbanked parties who wish to start their own business or have fast access to readily available funds.
This is why the Gluva team has already established partnerships with millions of potential users across Asia and Africa who need viable alternative credit options and was declared the winner of the Inclusive Fintech50.
Alchemy: The Alchemy of Crypto Liquidity
Launched in 2018, Alchemy Networks came as a response to what was described by its CEO Ryan Breen as a chronic lack of liquidity in crypto markets.
As an institutional liquidity network, Alchemy seeks to address the issue of decentralization in that it acts as a barrier to a more substantial concentration of funds, which, in turn, is a prerequisite for liquidity.
This is a contradiction that must be resolved by Alchemy.
How will this be done? First, the platform supports the idea that a liquidity pool as a source of support for funds and exchanges is a common good for all.
This is to be done by connecting the world of centralized and decentralized finance, with Alchemy serving as a highly compliant bridge through which individual users and institutions can access the magic of DeFi and earn yields with the help of digital assets. can.
“Compliance” is an important word here, as Alchemy aims to secure the trust of large institutional investors who want access to DeFi liquidity only when it clears like a whistle.
To make this possible, its liquidity providers are vetted through a bank-grade KYC/AML process.
At the same time, the Alchemy Earn (Tan) protocol supports lending and lending based on a permitted liquidity pool of digital assets that includes ETH, stablecoins, and WBTC.
To support wider access to DeFi, Alchemy Network will also connect its users to a digital asset permissionless liquidity pool that operates as part of its token generation event.
It remains to be seen to what extent Alchemy’s permitted trusted-counterpart liquidity will help the platform attract financial institutions that have so far been most comfortable in highly centralized ecosystems.
a storm in a glass of soda
The SODA protocol is a smart lending protocol with the credit system as the main goal of the protocol and focuses on providing liquidity and data for institutions.
Launched by a team of blockchain veterans, the SODA protocol is designed to bridge the liquidity gap that affects various protocols and hinders the full use of blockchain in the DeFi environment.
SODA seeks to fight this by distributing quality user data and funding to various protocols and institutions.
So, how does the data fit into all this? With SODA, valuable information will be collected and analyzed on how a party behaves on-chain, and based on this, the system will come up with an appropriate credit rating with the help of AI.
All this fits well with the core idea of the project that capital efficiency should replace the over-reliance on TVL (Total Value Locked) in the context of DeFi.
To optimize the capital efficiency of closed assets, SODA will bridge liquidity between different protocols, as well as develop a credit ecosystem that will accelerate the accumulation of on-chain value.
Since all of these protocols improve efficiency in their own unique way, providing liquidity for fair use of assets at the expense of focusing on ownership is considered the way to go.
In other words, the more instrument assets can prove their value to the user, the more efficient the lending protocol will be.
In any case, it is a new approach that prides itself on being a valid alternative to an array of tried and tested models in the rapidly evolving DeFi world.
Conclusion
Issues such as liquidity imbalances and under-utilisation of assets have been hindering the mainstreaming of DeFi solutions for quite some time.
Attracting the major players to the CeFi world while keeping an eye on underbanked and centralization-weary users at the same time is a balancing act that many DeFi projects want to pull off with the genre.
In any case, the sheer breadth of ongoing projects promise an exciting future for the global financial ecosystem that desperately needs healthier alternatives.