Lending is the second-most-popular segment of decentralized finance today. The industry represents over $45 billion in total value locked yet still suffers from significant inefficiencies. Hashstack finance and the testnet version of Open Protocol offer a much-needed breath of relief on that front.
DeFi Lending Is Popular
No one will deny that decentralized lending and borrowing is a prominent industry. Over 100 protocols across various blockchains and networks compete for traction. But, unfortunately, they all share a few fatal flaws that prevent DeFi lending from reaching its full potential. Solving these inefficiencies is crucial to bring decentralized finance to the mainstream, yet that is always easier said than done.
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The first issue holding back DeFi lending is how the concept primarily caters to existing crypto users. More specifically, most loans are issued to people who want to acquire more crypto assets, pocket a profit on their value change, repay the loan, and keep a small profit for themselves. It is a viable approach to making money, yet it doesn’t represent a real-world use case.
A second problem is the high collateralization requirement. Most platforms force users to put up anywhere from 110% to 300% of the amount they want to borrow. That does not appeal to the people who need access to alternative financial services and products. If they had the capital required for collateral, they wouldn’t necessarily need a DeFi loan. Unfortunately, high collateral requirements remain prevalent in the industry today.
To ensure decentralized lending and borrowing become more attractive, something will need to change. Lowering the collateralization requirements can introduce support for more mainstream use cases. Not everyone wants to acquire [more] crypto assets through a loan. People may need money to pay bills, improve their homes, obtain a car or electronic devices, etc. DeFi can cater to all of those needs, but only by addressing today’s inefficiencies.
Hashstack Finance Changes The Tune
It is crucial to understand that DeFi is still in an early stage of development. There is much room for progress, and innovation occurs every week. New concepts, ideas, and protocols will come to market sooner rather than later. Some projects introduce groundbreaking changes, whereas others try to build on what is already available. Hashstack Finance aims to tackle the issues plaguing DeFi lending and borrowing through its Open Protocol.
Hashstack Finance founder Vinay comments:
“Today, if you want to borrow $100 on Compound, or Aave, or even MakerDAO, you are required to provide a collateral of at least $142. This breaks the primary intent behind loan procurement, and has restrictive use-cases for the borrower. In comparison, through Hashstack’s Open protocol you would be able to borrow the same $100 with collateral as little as $33.33. This 4.25x value-add against every established market player today, is a remarkable milestone for the defi ecosystem in general, and will drive further adoption.”
Under the Open Protocol banner, Hashstack Finance launches undercollateralized DeFi lending. As a result, users can achieve a one-to-three collateral-to-lending ratio instead of the opposite. By putting up $50 in collateral, users can borrow up to $150. In addition, they can withdraw up to 70% of their collateral and use the remaining amount – collateral + borrowed funds – as in-platform trading capital.
Making matters more interesting is how the Hashtack Finance solution integrates with solutions like PancakeSwap. That introduces benefits to users, as they can convert borrowed tokens into any asset supported by the popular DEX and improve loan utilization. Additionally, Open Protocol bridges Binance Smart Chain, Ethereum, and the Avalanche C-Chain assets. Initially, the protocol supports major liquid currencies, including Bitcoin, USDC, USDT, BNB, and HASH.