Introducing INIT Capital: The Liquidity Hook Money Market
INIT Capital is founded on the belief that liquidity should be an accessible commodity for everyone. The platform aims to democratize access to liquidity, catering not only to DeFi users but also to protocols through ‘Liquidity Hooks.’
One of the biggest challenges for DeFi protocols nowadays is to bootstrap initial liquidity and consistently source it in order to grow.
Many protocols struggle to access liquidity in money markets due to its lack of composability, thereby capping protocol growth. While the DeFi landscape evolves continuously to accommodate diverse borrowing use cases, the architecture of money markets has not correspondingly evolved. This prompts protocols to independently source liquidity themselves, though liquidity is limited. Consequently, protocols spend a significant amount of their native token supply on incentives to source liquidity. This approach is unsustainable in the long term and leads to liquidity fragmentation.
To permanently solve this problem, new protocols need the ability to seamlessly integrate their applications with a large source of liquidity — a money market partner that prioritizes composability, soon on Mantle Network.
INIT functions as the Foundational Liquidity Layer for DApps, Designed to Foster Use Cases for DApps to Build ‘Liquidity Hooks’ Upon
TL;DR: All stakeholders at INIT, from dApps to users, can savor the experience of this Liquidity Hook money market.
- DApps: Source liquidity from INIT with ease by building a ‘Liquidity Hook’ to integrate onto INIT.
- Lenders: Enjoy higher lending APR as INIT’s integration partners exercise liquidity and expand the user base on INIT.
- Borrowers: Access Liquidity Hooks built by dApps to explore multiple yield strategies through INIT’s all-in-one dashboard.
Read on to delve into how INIT addresses the market gap in the existing liquidity infrastructure and what INIT has to offer.
Liquidity Hook, a Plugin for Liquidity on INIT
Liquidity Hooks serve as plugins for liquidity. DApps developing strategies such as all kinds of vaults, leveraged LP/Farming, perpetual trading, margin trading, LSTFi, etc., can easily build Liquidity Hooks by writing their smart contracts to integrate or ‘hook’ onto INIT and access INIT’s liquidity in a permissionless manner. With that, dApps can fully concentrate on catering yield strategies or ‘Hooks’ for end-users.
What This Means to DApps and Users
Benefits to DApps / Integration Partners
DApps can seamlessly bootstrap liquidity within INIT, expanding their user bases within INIT’s ecosystem and experiencing exponential growth. INIT is specifically designed for maximum composability and interoperability with DApps, enabled by key technologies such as Multi-Silo Position, Flash Borrow and LP Token as Collateral. These are the main features that make INIT composable, setting it apart from other platforms.
Multi-Silo Position
At INIT, each lending and borrowing position is siloed. This means each position is risk independent, even when using the same type of collateral. For instance, a wstETH-collateralized position borrowing USDC, USDT, and DAI is distinct from another using wstETH to borrow ETH for looping. If wstETH slightly depegs, the 2nd position can get liquidated but not the 1st.
In contrast, existing money markets often view all users’ positions as a single account, thereby permitting potential liquidation of users’ positions even when only one position is at risk.
As a result, this architecture grants dApps the flexibility to easily build various types of Liquidity Hooks on INIT, supporting a wide array of yield strategies.
Flash Borrow
To enhance composability further, INIT introduces Flash Borrow — a highly composable version of flash loans.
Users can borrow asset X and return Y as collateral within a single transaction, unlocking a wide range of Liquidity Hook possibilities. For example:
- A user provides $100 ETH as collateral on Alice Protocol, a leveraged yield farming protocol.
- Alice flash borrows $400 USDC from INIT
- Alice provides $500 liquidity to Uniswap V3 and receive LP token
- Alice returns $500 LP token as collateral on INIT
All of these are completed within the same transaction.
LP Token as Collateral
Presently, many money markets do not support LP tokens as collateral, thereby inhibiting DeFi composability. Numerous protocols have already developed diverse yield strategies based on LP tokens, like GMX, Pendle, Convex Finance, etc. Hence, a surge in the adoption of LP tokens as base assets is expected, allowing for the creation of more flexible and unique yield strategies. Therefore, supporting LP tokens as collateral is crucial for DeFi composability within INIT.
INIT is poised to support a range of LP tokens, encompassing ERC20 (AMM LP), ERC721 (CLAMM LP), and ERC1155, to provide users with various options for yield strategies.
Benefits to INIT Users
Accessibility to Yield Strategies via Liquidity Hooks
INIT users can access and manage various yield strategies or Hooks, all within the INIT interface, ensuring streamlined visibility and enhanced control.
Auto E-Mode (Auto Efficiency Mode)
INIT ensures users have maximum borrowing power to enjoy strategies with the highest capital efficiency.
With Auto E-Mode, assets with correlated prices are automatically grouped to enhance capital efficiency and maximize your borrowing power.
When collateral and borrowed assets are in the same mode, users benefit from increased borrowing power, leading to higher capital efficiency.
Here are a few example of modes on INIT:
- ETH & wstETH mode (ETH and wstETH)
- LST mode (ETH, wstETH, rETH, ETHx, mETH)
- Stable RWA mode (USDY, sDAI, stUSDT, TBILL, USDT)
- Stablecoin mode (USDT, USDC, DAI)
- Majors mode (BTC, ETH)
The Sustainable Growth Loop of INIT
Liquidity Hooks play a pivotal role in reinforcing interconnected growth loops created within INIT.
- Lenders and lending vaults lend to INIT.
- As Liquidity Hook is added, INIT lends liquidity to Liqudity Hook.
- The borrowing demand on INIT increases from users on 2 fronts:
a) Users utilizing the integrating protocol, which under the hood is using INIT.
b) Users utilizing Liquidity Hook directly on INIT. - This leads to a higher lending APY on INIT, attracting more lenders and lending vaults, resulting in higher TVL and more available liquidity for new Liquidity Hook to use.
- Ultimately, attracting new integrating protocols to build Liquidty Hooks, tap into INIT’s liquidity and the user base of the other existing Liquidty Hooks to capture that growth opportunity. As a result, more Liquidity Hooks on INIT, repeating this reinforcing growth loop from point 1.
Join the INIT Community
So what are you waiting for?
Head over to the INIT’s Discord and follow @InitCapital_ on Twitter to stay updated on the latest INIT Capital updates. Keep an eye out and get ready for a wave of rewards headed your way!
If you have any questions, please feel free to reach out on Discord, and the team will be more than happy to help.
About INIT Capital
INIT Capital is built as the liquidity hook money market that streamlines the process for both end users and dApps. INIT aims to function as the liquidity layer, facilitating DeFi activities (lending, borrowing, and yield strategies) for users and fostering use cases for dApps to build on top of. With INIT as the base liquidity layer, users can seamlessly access and manage yield strategies from dApps through INIT.
INIT is essentially where dApps and users meet, with access to unified liquidity and without the need to look elsewhere.
