Deepr Finance: Building a Strong Foundation and Navigating the DeFi Ocean

Decentralized lending has emerged as a crucial component within Web3’s ecosystems. This innovative approach to lending brings forth a myriad of benefits that address the shortcomings of traditional finance. By leveraging distributed ledger technology and smart contracts, decentralized lending platforms offer open, secure, and transparent solutions that empower users and drive financial services adoption and innovation.

In this article, we delve into the benefits of DeFi lending over traditional finance lending, and we also examine why Deepr Finance is in a prime position to lead the way in lending and borrowing within the Shimmer ecosystem.

DeFi Lending: A Game Changer

Let’s delve into the details and explore the reasons why DeFi lending surpasses traditional lending methods, unlocking a new era of financial possibilities.

• Lending in the traditional financial world can be a painfully slow and bureaucratic process, causing borrowers to endure frustrating delays before accessing much-needed funds.In contrast, DeFi lending operates on distributed ledger technology, enabling instant loan approvals without credit checks and efficient fund transfers, eliminating unnecessary delays.
• Intermediaries like banks dominate the lending landscape, monopolizing access to loans and dictating terms, resulting in a system that lacks transparency and control for borrowers. This centralized control introduces the risk of biased decision-making, high-interest rates, limited access to services and hidden fees. DeFi lending operates in a decentralized manner, ensuring transparent, open and fair lending practices with predetermined terms and variable interest rate models enforced through smart contracts.
• Traditional finance lending often demands collateral or creditworthiness, making it challenging for individuals without significant assets or established credit histories to secure loans. DeFi lending platforms, however, embrace innovative collateralization models, allowing borrowers to leverage a wide range of digital assets, unlocking financial opportunities for a broader user base.
• The sharing of personal and financial information with numerous intermediaries in lending processes poses a significant threat to borrowers’ privacy, elevating the risk of data breaches and unauthorized exploitation. DeFi lending, built on the principles of decentralization and self-custody, minimizes privacy risks by reducing reliance on centralized entities, protecting users’ data and financial sovereignty.

DeFi lending offers a plethora of benefits, but it’s crucial to recognize that the reliability and security of existing solutions vary significantly, with some lacking strong security measures and long-term vision. Deepr Finance sets itself apart by prioritizing top-notch security practices and a forward-thinking approach while ensuring the platform’s durability and sustainable growth.

Empowering Financial Freedom: Deepr Finance

Deepr Finance is a DeFi platform operating on the Shimmer network. It offers users the ability to lend and borrow digital assets in a trustless manner. By addressing the limitations highlighted earlier, Deepr Finance can effectively overcome drawbacks associated with traditional finance.

By providing collateral, borrowers can obtain loans, while lenders can earn interest on their deposited assets. Our platform fosters financial inclusion and innovation within a permissionless, transparent, and accessible ecosystem.

Now, let’s examine the processes of acquiring a loan and lending assets for a passive income through Deepr Finance and understand how it works.

The Process of Borrowing

1. Deposit collateral: The borrower deposits a supported asset (BTC, ETH, USDT, USDC, MIOTA, SMR) into a lending pool (which earns interest) and accepts it as collateral. The amount of collateral required has to be greater than the value of the loan the borrower wishes to receive.
2. Borrow assets: Once the collateral is deposited, the borrower can borrow other supported assets from Deepr Finance. The maximum amount a borrower can borrow is determined by their collateral ratio.
3. Repay loan: The borrower can repay the loan at any time, in part or in full. Interest is accrued on the outstanding balance of the loan in real-time, and is charged when the loan is repaid.
4. Withdraw collateral: The borrower can withdraw collateral, as long as it sufficiently covers the over collateralized debt position. If the value of the collateral falls below a certain threshold against the debt position, the borrower may need to add more collateral or repay all/part of the debt to maintain their collateral ratio and avoid liquidation.
5. Liquidation: If the value of the collateral falls below a certain threshold, the borrower risks being liquidated. When a borrower is liquidated, their collateral is sold to repay their outstanding loan balance and a penalty fee is paid to incentivise the liquidation process to safeguard the protocol.

The Process of Lending (Passive Income)

Lending on Deepr Finance works by allowing users to deposit supported crypto assets into the protocol and earn interest on their holdings. Here’s how lending on Deepr Finance works:

1. Deposit assets: The user deposits supported assets. Each asset has its own interest rate, which is determined by the supply and demand of the asset on the platform.
2. Receive cTokens: When assets are deposited into Deepr Finance, users receive an equivalent amount of cTokens. cTokens are interest-bearing tokens that represent the user’s share of the assets they have deposited. For example, if a user deposits 10 SMR into Deepr, they will receive 10 cSMR in return.
3. Earn interest: Users can earn interest on their cTokens in real-time. The interest earned varies depending on the asset and can change as the supply and demand of the asset changes (utilization rate).
4. Withdraw assets: Users can withdraw their assets and interest at any time by redeeming their cTokens. When cTokens are redeemed, the user receives the underlying crypto asset plus any interest earned.
5. Reinvest: Users can choose to reinvest their interest by depositing their cTokens back into Deepr Finance. This can result in compounding returns, as the interest earned on cTokens is automatically reinvested into the protocol.

By combining the lending and borrowing features, Deepr Finance creates a decentralized financial ecosystem where users can passively earn income by lending their assets, access liquidity by using their assets as collateral, and obtain loans based on over-collateralization. These functionalities empower users to maximize the utility of their assets, earn income, and access funds without relying on traditional financial intermediaries.

Strategic Loans: Expanding Financial Horizons

Deepr Finance offers users the flexibility to take out loans that can be utilized for various strategies and financial goals. Here are some key aspects and potential use cases to consider when taking a loan:

Paying expenses: The user may not wish to sell their assets to meet expenses, therefore they could secure a loan using their assets as collateral. Users often deploy this strategy when there’s an expectation that the assets will rise against their current value and is popular, especially in a bull market.

Taxes: In certain jurisdictions selling crypto is a capital gains tax event, whereas using crypto as collateral to secure a loan may not be and the interest paid could also be a tax deduction. Worth checking with your tax advisor before implementing such a strategy.

Short/long leverage: Loans can be utilized for both short-term and long-term leveraged trading strategies. Traders and investors can use the borrowed funds to amplify their trading positions and potentially enhance their returns. Whether it’s taking advantage of short-term market movements or holding positions for extended periods, loans offer a way to increase exposure to desired assets.

Governance weighting: In decentralized governance protocols, holding a certain amount of governance tokens often grants voting rights and influence over platform decisions. Users can take out a loan using their existing assets as collateral to acquire additional governance tokens, thereby increasing their voting power and influence within the ecosystem.

Yield farming: Loans can be used to participate in yield farming strategies, where users provide liquidity to decentralized platforms and earn rewards in the form of additional tokens or fees. By borrowing funds, users can increase their overall liquidity capacity and actively engage in yield farming opportunities, potentially earning additional income from their assets.

Conclusion

Deepr Finance brings forth a new era of financial possibilities by offering decentralization, transparency, and innovative collateralization models. By prioritizing security, we are well-positioned to lead the way in lending and borrowing within the Shimmer ecosystem, empowering users to maximize the utility of their assets, earn passive income, and access funds without the limitations of traditional finance. Embracing the benefits of DeFi lending paves the way for a more inclusive and innovative financial future. Join us on this exciting journey and explore the world of deepr.finance!