DeFi is expectedly promising in the lending sector, where it has the potential to radically alter the way liquidity is loaned and borrowed. This lending method has various distinctions compared to “conventional” bank lending and there are many traders looking for this method to build the investment strategy. Let’s explore why DeFi lending platform is full of prospects in the finance sector and what reliable lending platform investors must experience !
The word “DeFi” refers to the application of decentralized technology to power financial services that operate on the blockchain. This ground-breaking field removes centralized processes between middlemen and transcends geographical borders.
There are DeFi applications, so-called “DApps,” that offer protocols to increase efficiency and lower costs, making financial services more accessible to all from data recording (through distributed ledgers), consensus methods, and decentralized decision-making.
Peter Wall, CEO of global crypto mining company Argo Blockchain, says that DeFi is an umbrella term that expresses the need for an accessible, transparent, and secure system. Meanwhile centralized entities and banks continue to fail communities seeking trustworthy financial freedom.
The DeFi market has proven to be thriving. Early 2020, the total value locked (TVL) within DeFi protocols amounted to around $680 million. In just over a year, that amount grew by more than 50x to hit more than $40 billion of value invested in DeFi projects.
Source: DeFi Pulse ( February 2021)
DeFi possesses huge prospects of development, especially in the DeFi lending prospect, as up to March, 2021 more than $7 billion USD was committed to the DeFi lending initiative. As we can see that the assets are included mostly in lending protocol. It can be effortlessly comprehended that for the lending, DeFi users earn interest for supplying funds (or pay interest for borrowing funds) in a trust – free and non-custodial method.
Source: DeFi Pulse (Data as of March 2021: Locked value in USD billion.)
Apart from that, due to a high demand from the market, DeFi Lending Crypto is gaining huge development to form the automated money markets. Compared to the traditional lending money markets, which can be viewed as low-risk and short-term debt investments, the new market is similar but it’s far superior through decentralized protocols. The highlight of DeFi lending features could be listed as the elimination of Bank presence, high transparency, stability from overcollateralization, not liquidation but preserved assets and global flexibility.
DeFi lending platforms were mainly active on the Ethereum chain formerly, due to various benefits also advantages of the Ethereum ecosystem brought to the traders. And Aave is the most significant platform on the Ethereum ecosystem, which offers to traders a number of crypto services in lending, borrowing, flash loans and even rate switching features with the high liquidity protocol of Aave. Thus, Ethereum plays a crucial role in the DeFi industry for crypto asset lending.
Source: Aave website
Nevertheless, the situation has gradually changed in the last two years for the Ethereum ecosystem – which has an extraordinarily high growth rate and surely will continue its dominance in the near future, thus the demand has led to escalate the gas prices. These over-increasing gas prices have created dissatisfaction and boxed out many people from partaking in the Ethereum network lately.
That led to the demand from traders for the new ecosystem which has the affordable fee and Binance Smart Chain (BSC) was totally match and the flavour of the month in the crypto space 2021. This network, which is compatible with the Ethereum Virtual Machine (EVM) and with the pitch of a cheap, fast and nearly identical version of the Ethereum DeFi experience, has both developers and users excited. This is proven by seeing more and more migrated apps and users, who don’t want to pay these enormous gas fees.
Furthermore, the BSC uses an alternative to Ethereum’s Proof-of-Work consensus model called the Proof-of-Staked-Authority (PoSA) model. This PoSA model optimises the network for low fees and high throughput but sacrifices decentralization and censorship resistance to do so. The Binance Smart Chain allows for higher gas limits which allows for more transactions to be squeezed into each BSC transaction block, without worrying about congestion or fee hikes.
Hence, BSC is the other trustable ecosystem, besides Ethereum, and Venus is the most attentive platform on BSC. Venus aims at providing lending and borrowing services to the BSC, and allows users to mint the assets. Users can generate (mint) $VAI tokens, Venus Protocol’s synthetic stablecoin pegged at $1.00 as well as borrow up to 50% of their remaining collateral to mint VAI. “Over collateralized” lending is the vision which Venus targets where users can borrow assets of which the value is 75% or lower than the supplied assets. Earning high interest up to 15% APY by supplying supported collateral assets to the protocol are also the objective Venus offer to customers. However, Venus is limited in their features (no flash loans) and not diversified like Aave, in order to completely serve the trader’s demand. It might be a barrier for investors in the experience with BSC, while flash loans must be a highlight feature of DeFi lending.
Thus, the solution for this problem is to make the lending platform BSC becoming potentially comparable to Aave on Ethereum, that it would be an ideal platform established to cover all the disadvantages and even integrate many useful features better than Aave and Venus. So X-pool is published and considered as a suitable platform to cover all the downsides of the BSC platform and as bright as Aave.
X-pool is an open-source decentralized protocol developed based on Binance Smart Chain that allows users to lend, borrow and earn interest on crypto assets, all without middlemen. More specifically, Xpool is a DeFi lending protocol that enables their customers to lend and borrow a diverse range of more than 10 cryptocurrencies, using both stable and variable interest rates, in a trustless manner ( i.e., without intermediaries and allow users to enlist their crypto coins on the platform for lending purposes). Thereby making a profit easily from the assets you own. Apart from that with the advantages such as low transaction costs, fast transaction speed, flexible interest rate options, and open source. X-pool is the best choice to achieve the high APY up to 120% in the market at present.
Apart from that, X-pool possesses flash loans and liquidation features on the BSC ecosystem. With two strengths, X-pool differentiates their reputation compared to the other platforms on Binance Smart Chain ecosystem, which is expected to attract more users switching to and investing with the better gas low fee. You can refer to all the main functions of X-pool in the below picture or more information here. Since at the moment, broadly speaking, the BSC is preferred by most traders at the moment by the low gas fee with more features on platforms for users such as X-pool.
Source: DeFi Pitch Deck (2021)
DeFi lending provides several advantages over bank-based lending, all of which lead to improved trust and accessibility. As a result, lending DApps will grow more popular as customers discover they are more appealing than regular bank loans. Thus, choosing the appropriate lending platform is crucial and we hope that this article brought you more useful information regarding the emerging DeFi market.