Decentralized finance (“DeFi”) is a term that implies countless applications of crypto technologies.
What is common to all of them is the mission to bring the gradual evolution followed by the full-blown transformation of the existing centralized financial structures.
This will start by minimizing the dependency on middlemen that centralized financial infrastructure has grown to rely on.
In the following article, we will look at the most interesting projects that aim to put DeFi liquidity to good use in the most original and boldest ways.
An Avalanche of Decentralization – BENQI
As a decentralized, highly scalable, and open-source blockchain, Avalanche is stealing the spotlight not just as an alternative to Ethereum, but as a hotbed for attractive projects that are built on top of it.
BENQI is a decentralized native liquidity market protocol that seeks to streamline the process in which the digital assets can be utilized to borrow, lend and earn interest.
At the heart of the project is the platform that comes with a dedicated borrowing and lending market and liquidity staking option.
The platform features QI native token which is available for mining as part of liquidity pools on decentralized exchanges.
The alternative option is to use the QI token pool which is supported by the BENQI protocol. As a reward for providing liquidity to BENQI, users are entitled to both QI and other tokens.
At the same time, lending and borrowing markets make it possible for users to earn passive income by providing liquidity.
Similarly, borrowers can offer loans by means of over-collateralization of assets.
Liquid staking is supported by allowing users to stake AVAX tokens on the Avalanche C-Chain.
Staked assets are tokenized which allows users to diversify their options when it comes to managing capital as part of the DeFi ecosystem.
By its very design, BENQI is leading the charge in an effort to turn Avalanche into a platform of choice for all future endeavors involving DeFi.
It hopes to draw the users to it with the promise of lower fees and broader access to decentralized financial products.
Gluwa – Financial Inclusion for All
Gluwa is a financial platform developed with the goal to dismantle the borders. Yes, both symbolically and literally since its mission statement includes the promise of giving the broadest possible access of healthy currency to as many stakeholders as possible.
To achieve this, the Gluwa Invest Bond gives investors 12% APY on the loan they provide, while the loan itself is used to give access to much-needed credit lines to the unbanked in emerging markets.
Yes, the cause is good, but what about the model?
The Gluwa team wants to one-up other DeFi lending protocols by focusing on creating decentralized credit infrastructure for non-collateralized lending.
To achieve this, Gluwa recently kickstarted the premiere crypto native venture debt fund aimed at promoting financial inclusion and drawing retail investors with the promise of a fixed APY.
With Gluwa, liquidity is managed by pooling staked funds and offering this liquidity to all the partners within its ecosystem.
Users are given the opportunity to earn a share of collective interest from the liquidity pool. From it, the credit arrangements can easily emerge for a range of users, including the unbanked or underbanked parties that want to launch their businesses or gain fast access to readily available funds.
This is why the Gluwa team has already established partnerships across Asia and Africa with millions of potential users in need of viable alternative credit options and was declared winner of the InclusiveFintech50.
Alkemi: The Alchemy of Crypto Liquidity
Launched in 2018, Alkemi Network came about as a reaction to what its CEO Ryan Breen described as the chronic lack of liquidity in crypto markets.
As an institutional liquidity network, Alkemi wants to resolve the issue of decentralization in which it functions as an obstacle to a more substantial concentration of wealth, which is, in turn, a prerequisite for liquidity.
It’s a paradox that is supposed to be solved by Alkemi.
How will it be done? First of all, the platform supports the idea that liquidity pools are a common good for all as a source of support for funds and exchanges.
This is to be done by linking the world of centralized and decentralized finances, with Alkemi serving as a highly compliant bridge via which individual users and institutions can access the magic of DeFi and earn yields with the help of digital assets.
“Compliant” is a key word here, since Alkemi aims to secure the trust of large institutional investors that seek access to DeFi liquidity only if it is as clean as a whistle.
To make this possible, its liquidity providers are checked by bank-grade KYC/AML procedure.
At the same time, Alkemi Earn (Earn) protocol supports borrowing and lending based on a permissioned liquidity pool of digital assets which include ETH, stablecoins, and WBTC.
To support broader access to DeFi, Alkemi Network will also link its users with a permissionless liquidity pool of digital assets which operate as part of its Token Generation Event.
What remains to be seen is to what degree Alkemi’s permissioned trusted-counterparty liquidity will help the platform draw financial institutions that have so far been at their most comfortable in highly centralized ecosystems.
A Storm in a Glass of Soda
Soda Protocol is a smart lending protocol with a credit system focused on providing liquidity and data for protocols and institutions as its main targets.
Launched by a team of blockchain veterans, Soda protocol is designed to bridge the liquidity gap that plagues various protocols and impedes the full utilization of blockchain in the DeFi environment.
Soda wants to fight this by delivering quality user data and funding to different protocols and institutions.
So, how does data fit into all of this? With Soda, valuable information will be collected and analyzed in terms of how a party behaves on-chain, and, based on it, the system will come up with an appropriate credit rating with the help of AI.
All of this fits well with the core idea of the project that capital efficiency should replace the over-reliance on the TVL (Total Value Locked) in the DeFi context.
To optimize the capital efficiency of the locked assets, Soda will bridge the liquidity between different protocols while simultaneously developing a credit ecosystem that will speed up the accumulation of on-chain value.
Since all of these protocols improve efficiency in their own unique way, providing liquidity for the proper utilization of assets at the expense of the focus on ownership is seen as the way to go.
In other words, the more tool assets can prove their value to the user, the more capital efficient the lending protocols will become.
In any case, it’s a fresh approach that prides itself on being a valid alternative to an array of tried and tested models in the rapidly developing DeFi world.
Issues such as liquidity imbalance and asset under-utilization have been impeding the mainstreaming of Defi solutions for quite some time.
Attracting major players from the world of CeFi while keeping an eye on the underbanked and centralization-weary users at the same time is a balancing act that many Defi projects want to pull off with style.
Whatever happens, the sheer breadth of ongoing projects is a promise of an exciting future for the global financial ecosystem that is in dire need of healthy alternatives.