How the OMNI Parallel protocol works

🖇In the decentralized finance market, services of different protocols are most in demand for lending (i.e., users lend their ERC-20 tokens to earn interest income) and borrowing (i.e., users use their loan assets as collateral for borrowed funds). Parallel Finance shortly announced the launch of the new OMNI Protocol product. Let’s break it down with you in more detail. And let’s also look at the questions we often encounter.

📍A decentralized Omni protocol established to provide lending and borrowing services for various assets on the Ethereum blockchain. Users can lend their NFT and ERC-20 tokens to earn interest income. In addition, users can use their lending assets as collateral to borrow more assets. With the recent rise in popularity of NFT, Parallel Finance is gravitating towards implementing the 1st protocol update, adding value to the NFT ecosystem by improving price discovery and mobility.

🖇“I believe in a future where tokenized assets proliferate with different kinds of utility, applications, and connection to real-life assets,” по словам Yubo Ruan, Founder and CEO of Parallel Finance. “Our mission is to empower DeFi users by offering seamless and innovative products. As the DeFI sector continues to exponentially expand, we’re incredibly excited to continue to build off this momentum.”

📍The specificity is that users can lend and borrow not only common tokens but also NFTs as assets, while gaining access to cash without selling NFTs. The proceeds can be used to buy other NFTs or spent for all sorts of other purposes. How does this happen:?

  • From the assets of users is formed insurance reserve, in fact, it is a certain number of assets, which provides security creditors in case of force majeure, for example, lack of protocol.
  • When a user wants to pledge his NFTs as collateral, escrow is used, i.e., the NFT holder receives instead of the sent asset, nNFT and its metadata, which is then presented when the token is redeemed. The user can borrow against the NFT as long as he is within the borrowing limit. The Borrowing Limit (or LTV) is equal to the average maximum percentage of borrowing from all assets that have been provisioned and secured in the Omni protocol.
  • When ERC-20 assets are lent, the user will receive interest as a percentage of the interest paid by the borrowers. Borrowers of ERC-20 assets will pay interest using a balance between the amount lent and the amount borrowed in the pool. Borrowers will also be rewarded for interest in the form of sOMNI token.
  • If the total amount of borrowed funds (debt position) reaches a fairly high % of total secured assets (asset position) when borrowed, a closing occurs. Closing is the process whereby secured assets are sold to repay outstanding debt. It is possible to avoid liquidation by staying within your borrowing limit. If the user is close to reaching their borrowing limit, they can repay their borrowed amount and/or provide additional collateral.

All work of the Omni protocol is protected by external auditors — leading auditing firms that conduct comprehensive evaluations of smart contracts and blockchain code.

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