Introducing the Lendefi Protocol
Until recently, safe lending and borrowing was confined to banks and other traditional financial institutions. When people need a loan, or to invest their money, they normally turn to banks and to traditional financial services. This backdrop has been the status quo for decades … until recently!
Decentralized finance (DeFi) does not seek to dismantle these existing systems, but aims to improve the default positions of traditional lending institutions.
Undercollateralized Lending (or loans) is the future of DeFi, and DeFi platforms like Lendefi are at the forefront of providing this service.
So, what is undercollateralized Lending and why does it matter in the world of DeFi?
Undercollateralized lending is any type of lending that is not fully collateralized. This could mean that if the loan was ever defaulted on, the collateral would not be sufficient to cover the principal. Although the idea of undercollateralized lending may create doubts and worries, it has been cleverly designed to safeguard and protect both the borrower, and the lender’s interests.
Lendefi Protocol — A facilitator for Undercollateralized Lending
Lendefi is an innovative DeFi protocol providing a secure solution for investing, including with leverage, and most importantly, in supporting both lending and borrowing.
As a cutting-edge second-generation DeFi lending protocol, Lendefi allows borrowers to take out undercollateralized loans that can be invested in cryptocurrency or digital assets, whilst also allowing lenders to accrue interest on stablecoin deposits.
Through trustless transactions, Lendefi removes intermediaries from the lending/borrowing equation and takes away the counterparty risk that normally exists between the lender and the borrower.
This ability to make undercollateralized loans is one of Lendefi’s key advantages. Other protocols allow their users to take out collateralized loans, which means users can only borrow at most up to the value of the collateral that they already have.
Undercollateralized lending however allows borrowers to leverage their funds while benefiting from investment possibilities that would not otherwise have been possible, and having the potential to gain far higher profits. This will undoubtedly make digital assets more appealing to investors who are used to using such processes in traditional markets. Also, lenders can earn interest on digital assets lent out to borrowers.
Interoperability and Governance
Users can borrow with a variety of assets because of Lendefi’s unique interoperability. A borrower might, for example, use Compound (a lending platform) to secure an overcollateralized USDC loan using DAI as collateral, followed by using BUSD on Lendefi to obtain an undercollateralized loan to invest in wBTC.
Lendefi is governed by a Decentralized Autonomous Organization (DAO), which allows the protocol to be completely governed by Lendefi’s community and stakeholders.
Lendefi’s selection of digital assets is currently supported by Uniswap’s liquidity, and furthermore, digital assets will be added depending on the approval of Lendefi’s DAO.
The Lendefi protocol has a native token, LDFI, which is a governance token regulating the interest rate model, supporting asset inclusion, rewarding distribution as well as Protocol updates. Holders of LDFI can participate in the governance of the Lendefi protocol via the DAO.
Lendefi aims to revolutionize the fast-growing industry by allowing borrowers to obtain undercollateralized loans, and providing lenders a safe way to earn interest from their stable coin deposits.
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The Lendefi protocol will deliver leveraged trading and secured lending to the cryptocurrency markets. Utilizing an undercollateralized loan model, Lendefi facilitates a trustless relationship between lenders and borrowers, managed by the protocol to remove counterparty risk.