Decentralised finance exploded onto the scene in 2020 (“DeFi Summer”), as numerous platforms sprung up hoping to disrupt the centralised framework that has governed borrowing, lending and everything in between for most of modern financial history.
After the initial hype simmered down, progress has continued, although definitely slowed form those halcyon days. One problem that has proved difficult to solve is that of overcollaterised borrowing. Due to the volatile nature of cryptocurrency, loans normally must be overcollaterised – commonly at 150% – to protect the lender in the event of large market downturns. Obviously, this drags the efficiency of capital, with the borrower sacrificing more than the value of the loan.
With the prospect of using crypto to collaterise your loan very attractive, but the necessity to lay down too much crypto to do so unappealing, it has become a problem.
Hashstack Finance, through its Open Protocol, is looking to solve this problem.
Open Protocol
This afternoon, Hashstack Finance have officially announced the launch of the public testnet for Open Protocol, which will offer non-custodial, under-collaterised loans. The permitted collateral-to-loan ratio is 1:3, representing an enormous improvement on the standard 1.5:1 arrangement across DeFi. The bulk of the loan must be used on the platform, with traders able to withdraw up to 70% of the collateral amount to trade elsewhere.
For example, $1000 of collateral will allow a trader to borrow $3000 through the protocol. Of this borrowed amount, you can withdraw 70% of the collateral amount off the platform, which in this case would be $700. So, $2300 must be traded on the platform and up to $700 can be withdrawn and used elsewhere.
Our public testnet has attracted over US$5
