The Lendefi DAO

The opportunities for token holder interaction through Lendefi’s DAO.

Lendefi Protocol
Jul 20, 2021 · 4 min read

Lendefi is moving rapidly towards opening its testnet to the public, along with the launch of user acceptance testing and a bug bounty program. The successful conclusion of these three processes will strengthen the security of Lendefi’s protocol and prime the marketplace for mainnet launch on the Binance Smart Chain.

Following mainnet launch, Lendefi intends to transition the protocol’s management structure into a Digital Autonomous Organization (DAO). This transition will facilitate the control of key protocol functions by the owners of Lendefi’s native LDFI tokens. All important aspects of control over the protocol will be divested from Lendefi’s current public management into the discretion of the DAO.

The DAO concept is a blockchain centric approach to decentralized governance of organizational structures. It is predicated upon the view that an organization’s token holders are ideally positioned to make decisions on the operation of an organization. The governance structure of the DAO negates the problems associated with traditional centralized management structures, such as corruption and slow response times.

Through Lendefi’s intended DAO, token holders will be able to propose and vote on changes in how the protocol operates. Transitioning to a DAO could impact sales of LDFI tokens as ownership will equate to influence over the protocol’s operation. All the major elements of Lendefi’s control and operational structure will be handled by the DAO. Some of these may include:

The Factor Of Lending

Lendefi’s core functionality facilitates leveraged trading through undercollateralized loans. Traders deposit funds into the protocol and decide what percentage of leveraged funds to borrow from the lending pool. The factor of lending is integral to the functioning of Lendefi’s protocol and members of the DAO could vote to optimize the factor of leverage during dynamic market conditions.

Interest Rates

When traders borrow from the lending pool, interest payments are made from the borrower’s deposit to recompense the lending pool for the loan. This rate of interest will impact the value to the lending pool, along with the cost of borrowing to the trader. Optimizing the rate of interest will provide the best value for both parties within the lending equation. Through Lendefi’s DAO, token holders can propose and vote on changes to the protocol’s interest rates.

Inclusion Of Digital Assets

Initially, the Lendefi protocol will facilitate the leveraged trading of BUSD and CAKE tokens. As the protocol develops, further digital assets can be added to the list. Which digital assets are available to traders can be proposed and voted upon through Lendefi’s DAO.

Payment Intervals

Interest payments from the borrower to the lending pool will be made at regular intervals. In the future, it is conceivable that the DAO could decide to alter the nature of payment intervals and these changes could impact how the market perceives Lendefi’s use case. Pro rata payments, discounts and other adjustments to interest payments could be changed through DAO voting.

Marketing Budgets

The protocol’s growth and usage volume are directly related to how it is presented to the global marketplace. Because Lendefi offers both long and short leveraged trading options, it delivers opportunities for both bull and bear markets. Marketing initiates and their associated budgets could offer additional input options for holders of LDFI tokens through the DAO.

Protocol Updates

Holders of LDFI tokens can contribute to the operation of the DAO by proposing additions and adjustments to Lendefi. Staking options, promotional initiatives and additions to the protocol’s trade functionality are all options that might be suggested and approved through the DAO. Because Lendefi was intended to transition into a DAO from conception, flexibility and growth options were considered throughout the development process.

Monetary And Asset Controls

The final stage to the implementation of Lendefi’s DAO will be the inclusion of monetary and asset controls. These will ensure the security of Lendefi’s treasury by requiring DAO approval for the transfer of funds within the protocol. This will remove any opportunity for embezzlement or fraud and place financial control over the protocol into the hands of LDFI token holders. By ceding control over Lendefi’s treasury to its token holders, Lenedfi will define itself as a protocol that operates with the highest financial and operational integrity.

The marketplace for cryptocurrencies and digital assets is dynamic and global. This presents opportunities, as well as pitfalls to organizations that are not agile enough to swiftly adapt. Although a DAO does not remedy all structural challenges within organizations, it does provide a swift and decentralized structure from which to implement organizational changes. As Lendefi transitions the management of its primary functionality into a DAO, the protocol will be ideally positioned to leverage these inherent opportunities for the benefit of LDFI token holders.

The Lendefi protocol will deliver leveraged trading and secured lending for cryptocurrency markets. Utilizing an undercollateralized loan model, Lendefi facilitates a trustless relationship between lender and borrower, managed by the protocol to remove counterparty risk.

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Leveraged trading via secured undercollateralized loans.