Revolutionizing DeFi: Unfolding Secured Finance’s Unique Features (2)
Exploring the Auto-Rolling Function
Introduction
In the universe of decentralized finance (DeFi), efficiency is the name of the game. In order to stay competitive, platforms must innovate to address potential hurdles faced by investors. Secured Finance, a pioneering DeFi platform, introduces an impressive feature to tackle reinvestment risk associated with fixed-term investments: the Auto-Rolling function. Designed for both lenders and borrowers, this function automates the reinvestment process, ensuring a smooth, easy, and cost-efficient transition at the maturity of an investment.
The Need for Auto-Rolling
Investing in fixed-term assets often involves reinvestment risk. Upon maturity, it can be a daunting task to find similar conditions for reinvestment, especially with larger investments. Recognizing this challenge, Secured Finance incorporated an Auto-Rolling feature in its protocol system. Instead of redeeming your investment upon maturity, the Auto-Rolling function allows for automatic reinvestment in the nearest 3-month bucket. This feature benefits passive investors and borrowers by eliminating the operational costs of finding another counterparty on the order book, thereby stabilizing the protocol, maintaining total value locked (TVL), and promoting continuous growth for users.
Unpacking the Benefits of Auto-Rolling
Auto-Rolling in Secured Finance presents three primary benefits:
- Mitigating reinvestment risk: By rolling over positions to the nearest market with a close-to-mid price, the Auto-Rolling function significantly reduces the risk of reinvestment. This innovative approach ensures that users can maintain a steady investment strategy, even in fluctuating market conditions.
- Cost-efficiency: The Auto-Rolling feature eliminates the need for investors and borrowers to find another counterparty on the order book. This automated process translates to significant cost savings for users and contributes to maintaining the TVL within the protocol.
- Continuous growth: By streamlining the reinvestment process, the Auto-Rolling function fosters protocol stability and ensures continuous growth for users. This feature enhances the value proposition of the Secured Finance platform for both investors and borrowers.
Operational Elegance: How Auto-Rolling Works
The Auto-Rolling function on Secured Finance is a set-it-and-forget-it type feature. If you have a position set to expire, no action is required on your part. The platform’s smart contract considers the market rate for the next three months and reinvests on your behalf. Both lenders’ and borrowers’ positions roll simultaneously, minimizing market impact.
A crucial aspect of the Auto-Rolling function is the implemented 3-stage price waterfall mechanism. This mechanism safeguards against price manipulation by monitoring price fluctuations.
Stage 1: In normal, liquid market conditions with frequent transactions, the system tracks all transactions within six hours of maturity and calculates the volume-weighted average price.
Stage 2: If no transactions occur during the designated period, indicating less liquidity, the system adjusts the duration and calculates the roll price from the ‘Last Traded’ price.
Stage 3: In cases of extreme conditions, where no transactions have taken place for the past three months, the system resorts to using the price from the previous roll.
Conclusion: Auto-Rolling — An Innovative Step in DeFi
Secured Finance’s Auto-Rolling function presents a revolutionary solution to the challenges of fixed-term investment reinvestment. This feature reinforces the platform’s commitment to providing easy, efficient, and cost-effective investment strategies in the DeFi space.
Secured Finance is committed to delivering novel features and products that not only meet the needs of investors but also anticipate and address potential challenges in the DeFi landscape. Stay tuned for our next article, where we will delve into the workings of the Itayose or pre-open order system and how it influences the trading experience on Secured Finance.
In the rapidly evolving world of DeFi, staying informed and understanding the unique features available to you are crucial to maximizing your investments. Until our next exploration of Secured Finance’s features, happy investing!
