Aurox Lend

Giorgi Khazaradze
Jan 19 · 5 min read

Aurox Lend is Aurox’s decentralized lending and borrowing platform. It is a fork of Compound’s DeFi platform with a few modifications. Aurox Lend is directly coupled with Aurox’s centralized order placement terminal called Aurox Trade. This allows lenders on the platform to supply cryptocurrencies and stablecoins to margin borrowers on the terminal. This is a property that is unique to Aurox, and allows us to offer a premium interest rate to lenders while at the same time offering a competitive rate to margin borrowers.

Image for post
Image for post

Below we will learn about some of the current challenges lenders and borrowers have to contend with, and how Aurox is able to solve some of these challenges using our novel approach to lending and borrowing.

Unreliable Interest for Lenders

Today’s DeFi lending and borrowing platforms are reliant on realtime market supply and demand resulting in erratic yields. It is not uncommon for yields on platforms like Aave and Compound to swing 25% in the span of a month. Oftentimes the yields are sub-par given the considerable exposure and risk.

Decentralized lending platforms are constrained in their risk mitigation capacity due to having no control over loaned capital. DeFi borrowing is truly permissionless, allowing any borrower to withdraw loaned funds off platform and use them as they see fit. Borrowers may subject themselves to substantial risk depending on the use of these borrowed funds, a risk that cannot be actively mitigated by current DeFi lending solutions.

To solve this, DeFi lenders require substantial collateral, oftentimes at 2x the borrowed amount. A borrower who wishes to borrow USD 200 in ETH, would be required, for example, to lock USD 400 in wBTC on a typical DeFi lending platform. This makes it expensive to borrow cryptocurrencies, requiring more collateral than what is being borrowed. For some borrowers, it may make more sense to simply acquire the cryptocurrency directly. For others, the amount of borrowed capital is limited, typically, to half of what is posted as collateral. Therefore, while borrowing demand might actually be higher, borrowers are always limited to a loan amount that is a fraction of their available holdings, resulting in an artificial limit to demand.

Since DeFi lenders are not integrated with any specific borrower, they are relegated to being generalists and can only charge rates that are commensurate with the broad market. During times of high demand, this can be rewarding to lenders, however, during times of low demand, the opposite is true, resulting in low yields. In general, cryptocurrency and stablecoin yields at DeFi lending and borrowing platforms are less than what is available by their CeFi counterparts such as BlockFi and Celsius.

Competitive Interest with Aurox Lend

Aurox Lend is designed to provide some of the most competitive yields for lenders in the DeFi space. While the rates will be determined by actual market supply and demand, just as it would for any other DeFi lending platform, Aurox Lend couples lenders with one of the highest paying borrower categories — margin borrowers.

This is possible due to the direct integration with Aurox Trade, our trading terminal which taps into liquidity of several centralized exchanges. Where other DeFi lending platforms are unable to secure loaned funds other than through posted collateral, Aurox can restrict withdrawal of funds from its trading platform, and can also force the liquidation of borrowed funds in order to cover market declines.

The above allows borrowers access to 4x margin loans, providing enough leverage to adequately meet market demand, while providing lenders with a reliable source of high demand, and high interest loans. Furthermore, the high margin ratio is likely to attract high-performance traders who are willing to pay higher interest premiums.

Aurox intends to lend cryptocurrency on margin at a competitive rate. Below is a comparison of current daily and annual margin lending rates across popular exchanges. From the below table we can see that annual rates vary greatly between exchanges, but even the most competitive rates are still in the double digits. Provided Aurox can lend at a rate similar to the most competitive of these exchanges, the return to lenders should be far greater than what is available through other DeFi lenders.

Image for post
Image for post

To put this in perspective, we take the APY earned by lenders on popular platforms Compound and Aave and compare them with the above hypothetical market return on Aurox. Assuming a spread of 15% to account for a reserve, and 10% in fees, the net APY to a lender is indicated in the table below.

Image for post
Image for post
In this example we can see how margin lending rates generate a more substantial yield than generalized lending solutions such as Compound and Aave.

Advantage to Margin Borrowers

Borrowing directly from Aurox for margin allows a trader to achieve substantially greater leverage than if they were to perform the same action on a DeFi lender like Compound.

Image for post
Image for post

Too Good to Be True?

While Aurox is one of the first projects to implement decentralized lending in a highly specific way, the concept of loaning capital to high interest paying borrowers while minimizing collateral occurs elsewhere in the cryptocurrency lending space.

Centralized finance lenders such as BlockFi and Celsius, for example, are already doing this. The advantage a centralized lender has over a decentralized lender is that they can collect specific information on their client such as credit worthiness, in order to determine the ability to pay back a loan. They can also pursue collection measures that are unavailable to DeFi lenders — whom, because of their permissionless nature, have no information on their borrowers.

Since Aurox Trade is a centralized order placement engine that utilizes the same process to determine margin eligibility for its customers, it has the potential to provide leveraged capital, while offering similarly high interest rates to lenders.

Urus Token

Merging The Positives Of Decentralized And Centralized Trading To Create A One Of A Kind Terminal

Giorgi Khazaradze

Written by

College dropout, with a degree in Entrepreneurship.

Urus Token

The Urus Token powers the most advanced cryptocurrency terminal on the market. Users can safely lend cryptocurrencies to the DeFi lending protocol and earn interest generated by borrowers on the Aurox Trade platform.

Giorgi Khazaradze

Written by

College dropout, with a degree in Entrepreneurship.

Urus Token

The Urus Token powers the most advanced cryptocurrency terminal on the market. Users can safely lend cryptocurrencies to the DeFi lending protocol and earn interest generated by borrowers on the Aurox Trade platform.

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store