- February 10, 2022
- Posted by: MasterAdmin
- Category: Cryptocurrency
Promoting Innovation in the DeFi Ecosystem
Venus, Binance Smart Chain’s leading DeFi lending protocol, is introducing a grants programme to stimulate innovation within its ecosystem, encouraging DeFi breakthroughs that will lay the groundwork for wider institutional use in a multi-chain environment.
\ The proposal to start the grant programme intends to use the Venus treasury, which has several million dollars worth of XVS, to support community grants and protocol development. The Venus Grants Program is a well-organized effort to put this money to good use by allowing external development teams and individuals to contribute beneficial features and services to the Venus protocol.
The funding programme supports a broad range of activities, including developing core protocol and additional projects built on creating alternative frontends and apps that integrate Venus, developer tools, code audits, and bounties. Proposals that focus on the community, such as instructional material grants and hosting events and hackathons, will also be considered.
\ Brad Harrison, CEO of Venus, said:
We’re especially excited to support applications that build upon the core Venus smart contracts. Yield aggregators, strategies, or even alternative frontends that help us further decentralize and increase reach with users. If you want to build it, we will support you in any way we can.
\ The Venus Protocol is an algorithmic-based money market system that enables decentralized lending and borrowing. Cryptocurrency owners may use their holdings to provide collateral to the network, receiving a variable APY as a result. Borrowers may get low-cost, fast loans in stablecoins without liquidating their non-stablecoin digital assets.
\ To secure the protocol, Venus borrows against crypto assets using collateral provided by the market and mints synthetic stablecoins with over-collateralized positions backed by a basket of cryptocurrencies. This creates a safe loan environment by paying lenders a compounded yearly interest rate per block while borrowers pay interest on the coin they borrow.
Understanding DeFi Loans
Crypto assets underlying value may rise or fall, but they do not earn interest if they lie idle in wallets. Simply owning a coin will not result in any profit. It is in this circumstance that Defi loans come into play. Defi loans allow users to lend their crypto to others in exchange for interest. Banks have historically made extensive use of this service. Anyone may now become a lender in the world of Defi. A lender may lend their assets to others and earn interest on such loans. This may be done via lending pools.
\ Smart contracts allow users to combine their assets and transfer them to borrowers. The same is true for borrowers since each pool will approach borrowing differently.
When you take out a bank loan, you must have collateral to back up your loan. The automobile, for example, is collateral for a car loan. The bank will confiscate the car if the user defaults on the loan. The decentralized system is similar; the main difference is anonymity and does not need any tangible assets as collateral. The borrower must provide something of value than the loan amount to get a loan. Smart contracts are employed to deposit this quantity of cash of at least equal value to the loan amount. Collaterals come in various shapes and sizes, and any crypto token may be used to repay a loan. For example, if a user wants to borrow one bitcoin, he must first deposit one bitcoin’s price in DAI.
\ Furthermore, Bitcoin values continue to fluctuate significantly. When the collateral cost falls below the cost of the loan, a lawsuit may emerge. Now comes the issue of how to handle this circumstance. It could be easier to explain with an example. Assume a user requests a loan of 100 DAI. Borrowers must put up a minimum of 150 percent of the loan amount as collateral with MakerDAO. This immediately implies that the borrower must put up $150 in ETH as security for the loan. A liquidation penalty is applied when the collateral value falls below $150 ETH.
Defi loans can transform the financial sector completely. Payments, trade, investments, insurance, lending, and borrowing are all initiatives to decentralize conventional financial services. As a result of its involvement with this fascinating technology, Defi lending has enormous potential to transform the global financial ecosystem.
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