Decentralized finance is a thriving industry, but there is much room for improvement. The lending segment can benefit greatly from under-collateralized loans. Hashstack brings that option to market as its Open Protocol is now on the public testnet.
Open Protocol Is A Big Deal
As lending is the largest segment in decentralized finance, any improvement in that segment is worth paying attention to. Hashstack, through its Open Protocol, has come up with a solution to address the high collateralization requirements in this industry. Today, users often put up 150% – or more – of the amount they want to borrow. Unfortunately, that makes crypto loans far less appealing than they could be.
Solving that issue is not easy, as lending in crypto means dealing with volatile assets. There needs to be a buffer in case prices go down significantly. Stablecoins provide a potential solution, although Open Protocol takes a different route. It is the first DeFi lending protocol to provide under-collateralized loans in a non-custodial fashion. As such, users can maximize the value of their collateral when borrowing, making DeFi a more attractive segment.
It may seem strange that under-collateralized loans have not been available without custodial solutions until today. Using under-collateralization requires a very different approach from traditional lending and borrowing protocols. Open Protocol goes one step further by using a 1:3 collateral-to-loan ratio, providing a $300 loan on $100 as collateral. Moreover, users can withdraw up to 70% of their collateral and use the remaining borrowed funds as in-platform trading capital.
Hashstack, the team behind Open Protocol, has come up with a new mechanism facilitating the eternal scalability of logic and storage of smart contracts. It is a step up from the EIP-2535 industry standard, and Hashstack will submit as EIP-9000 to fuel further industry growth. Another benefit of this mechanism is how Hashstack can integrate any dApp with Open Protocol without smart contract changes.
Under-collateralized Lending Hits The Public Testnet
The solution by Hashstack can reshape decentralized finance for good. However, the protocol needs to undergo rigorous testing by the public. To address that aspect, the protocol is now accessible through an open testnet enabling the Hashstack team to fine-tune the solution. Users can playa round with an improved interface, a hybrid access model, and improved transparency.
Hashstack Finance founder Vinay Kumar adds:
“Our public testnet has attracted over US$5 million in total value locked (TVL) immediately after going live. The public testnet release marks a significant accomplishment in Hashstack’s roadmap as we prepare to launch the Open Protocol mainnet later in the second quarter of 2022.”
The ability to access under-collateralized loans will set DeFi apart from the current norm in a good way. Decentral lending should work by removing the need to put up more collateral than one needs to borrow. Open Protocol offers a glimpse of what the future of lending and borrowing may look like.
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