All about MYSO — A new lending paradigm
MYSO Finance is building the leading protocol for zero-liquidation loans
If you’ve been sucked into the world of DeFi, you have undoubtedly used or interacted with various yield farms, staking protocols — or even borrowed or lent out your crypto holdings. Lending is by far the most adopted use case for DeFi, with tens of billions of dollars locked in as collateral or lent out across various protocols and blockchains. Decentralized non-custodial lending protocols such as AAVE, Compound, and Maker have ignited the flourishment of DeFi and brought billions of liquidity to a novel financial environment. Just these three protocols alone have Total Value Locked (TVL) figures above $22.5 billion, with liquidity and collateral deposited across several blockchains with recent updates such as AAVE V3.
These borrow/lending protocols of today almost always take a liquidation-centered design approach, meaning that they trigger liquidations once some Loan-to-Value (LTV) threshold is reached when a borrower’s collateral falls in value.
Many DeFi enthusiasts, including ourselves, see this protocol mechanism as something that can be improved upon. Traditional DeFi borrow/lending protocols suffer from a number of shortcomings, including:
- Periods of market turmoil intrinsically bring about mass liquidations, which result in millions of $ worth of liquidation penalty fees. In turn, this creates financial contagion risk, as cascading liquidations and increasing sell pressure could destabilize multiple facets of the DeFi markets
- Places credit risk entirely on borrowers and skews incentives towards liquidators, which in turn causes “over-liquidations”
- Operational overhead is extensive when utilizing available DeFi protocols — borrowers need to constantly monitor health/LTV ratios and adjust positions
- Oracles and precise price feeds are necessary to accurately price assets and trigger liquidations — today’s borrowing protocols are thus susceptible to oracle exploits and flash crash risk. This places a great deal of trust and reliance on proper oracle functionality, and makes markets only available for assets (and blockchains) which have reliable oracle oversight
We see these characteristics as limitations to the borrowing experience and are creating novel mechanisms for users and liquidity providers alike to branch out their yield aggregation strategies. This is why we founded MYSO, which stands for “Million Yield Structuring Opportunities.”
MYSO’s first product, the IKARUS Protocol, introduces 0xLoans, which allow for users to pledge their crypto as collateral and borrow against it with zero liquidation risk. This means that borrowers will always be able to claim their collateral for a pre-agreed repayment amount regardless of price action. On the other hand, liquidity providers (LPs) get exposure to an automatic option writing strategy, where they are awarded a risk premium for bearing the associated downside risk. The IKARUS protocol introduces a novel DeFi protocol to facilitate peer-to-pool trading between borrowers and LPs.
Let’s take a look at how the design of 0xLoans differs from conventional DeFi borrowing solutions:
- No risk of liquidations: with zero-liquidation loans, you don’t have to worry about liquidations and corresponding penalties whatsoever.
- Oracle independence: 0xLoan markets are free from possible oracle exploits and flash crash risk.
- No LTV monitoring needed: you don’t need to worry about monitoring your health factor or LTV thresholds.
- No variable borrowing costs: your interest rate costs are known in advance, so no surprises with spiking variable rates.
- Fixed expiry: zero-liquidation loans are fixed-term instruments, whereas other borrowing solutions are typically open-ended.
With over $115 million in collateral that has been liquidated on just AAVE, Compound, and Maker alone in the past week, the market for liquidations has reached a significant size. As DeFi borrowing continues to grow and markets adjust to current macro conditions, we expect this number to expand even further. MYSO hopes to thus provide an alternative liquidation-less borrowing solution with a natural opportunity to grow alongside the overall DeFi borrowing demand. At the same time, liquidity providers are also in search of new DeFi yield opportunities. Writing (call/put) options is a well-known yield enhancement strategy and with 0xLoans, we’re able to match LPs in search for new yield sources with borrowers in search for alternative borrowing solutions.
To get the community excited to learn more about the DeFi space and describing in detail the problems that MYSO and 0xLoans are working to fix, we will be releasing the MYSO Research Series. We will kick off the series with a liquidation deep dive next week and go into the ins-and-outs of liquidations and liquidation-based borrowing.
MYSO was created on the ideals of creating a straightforward and hassle-free DeFi borrowing experience. MYSO Finance was founded in early 2022, after being awarded as one of the winners at the ETHOnline Hackathon in October 2021. The team comes from a varied background of TradFi and engineering professions, and has years of experience in the cryptocurrency space.
We have been working diligently for the past several months to build out MYSO and are currently ongoing with a smart contract security audit from a top auditing firm. While working on the protocol and building an organic community, we announced a $2.4M seed raise in late April, which we are deploying to accelerate the development of the IKARUS protocol.
We have recently revealed the launch of a private testnet for early supporters. About 200 spots have been secured for users to interact with the IKARUS Protocol and put 0xLoans to the test. The private testnet is set to be launched end of June if everything goes to plan with the security audit, and we are excited to see how things unfold!
Be sure to be on the lookout for the launch of our MYSO Research Series next week, and to stay updated with announcements and happenings, feel free to follow us on Twitter and join the Discord!
