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DeFi has achieved success on Ethereum, especially since Compound implemented liquidity mining in June this year, which has detonated the entire DeFi field. According to the current statistics of defipulse, the total amount of assets locked in the entire DeFi is as high as 13 billion US dollars.
The success of DeFi on Ethereum has also prompted other chain assets to try to participate in the development of DeFi. For example, Bitcoin has realized circulation on Ethereum through a centralized packaging method (such as wbtc). There are about 140,000 tokenized btc currently circulating on Ethereum, valued at more than 3.6 billion U.S. dollars.
In addition to Bitcoin, there are other chain assets that also want to participate in DeFi, and if the way of participation is to conform to the spirit of DeFi, it needs to be implemented in a decentralized way, which means decentralized cross-chain DeFi demand will increase.
Cross-chain DeFi realizes the free circulation of assets
At present, DeFi mainly includes activities such as lending, trading, derivatives, and liquidity mining. Participating in these activities requires interacting with different dApps. For example, a user borrows ETH in Aave, mortgages DAI in Maker, and buys more ETH on Uniswap, thus making more ETH. The user has to interact with the interface of multiple protocols and control the mortgage rate through multiple protocols. The experience of the whole process is not ideal. In addition, to generate and trade synthetic assets, conduct on synthetix, conduct decentralized option trading, conduct on hegic... There is a lot of fragmentation among dApps.
If these dApps are all based on the Ethereum chain, they are not the most complicated, at least they are all traded and settled on the Ethereum chain. With the increase in demand for asset interoperability between different chains, cross-chain asset circulation and cross-chain DeFi are more complicated. Because there are different ledgers and different wallet addresses between different blockchains, it is not easy to participate in DeFi activities, such as liquidity mining, lending, and transactions.
In order to participate in the DeFi of different chains, current users often need to exchange tokens through a centralized exchange before participating, but the original token exposure may not be maintained. For example, if a user puts btc on a centralized exchange Converting into dai and participating in DeFi activities seems to have gained a lot of benefits in the short term, but the recent increase in btc may cause users to lose more. At this time, users need to use btc to directly participate in the DeFi on Ethereum, so wbtc was born. But it also has the characteristics of centralization. This makes the need for direct decentralized cross-chain lending, transactions, and liquidity mining more urgent. If there is a truly decentralized cross-chain DeFi, it means that there is no need to complete the flow of assets between different chains and directly participate in DeFi activities through a centralized organization.
For example, mortgage DOT, lend ETH, lend DAI, and use DAI to participate in liquidity mining of various DeFi projects. In this way, idle DOT assets can be used to obtain higher returns. The reverse is also true. Users can directly use idle ETH, DAI, etc. for mortgage, lend out DOT, and use DOT to participate in various DeFi activities.
In short, cross-chain DeFi needs to achieve free circulation between different chain assets and direct participation in DeFi activities through interoperability agreements in order to achieve truly seamless open finance. This is why Equibirium exists.
Equilibrium's cross-chain lending market
Equibirium is an interoperable platform for cross-chain DeFi liquidity pools. It uses Polkadot technology, using a Substrate-based engine and cross-chain bridging to achieve the interoperability of DeFi liquidity pools. Follow-up Polkadot launches version 2.0, and Equilibrium plans to become a parachain on Polkadot, thereby providing interoperable cross-chain DeFi services for various assets.
Equlibirum unifies the asset pools of different chains to form a decentralized lending platform and a cross-chain DEX platform. From the perspective of user experience, Equilibrium can use ETH to borrow assets on chains such as DOT, and vice versa; users can also use Equlibrium to implement direct asset exchange between different chains, such as directly converting DOT assets into ETH assets. In this way, by providing interoperability for different chain assets, seamless participation in DeFi activities can be achieved, thereby solving the problems of fragmentation of operations and non-interoperability of assets.
If it is simple to understand, Equilibrium can currently be regarded as a cross-chain currency market, similar to cross-chain Aave or Compound. In addition, in addition to cross-chain lending, Equilibrium can also implement cross-chain DEX.
Let’s take the lending market as an example. What’s so special about Equilibrium?
Differences in the Equilibrium lending market
- Cross-chain interoperability
Cross-chain interoperability is the biggest difference between Equibirium and Aave and Compound. Because both Aave and Compound are based on the Ethereum lending market. Equibirium is a cross-chain lending market, which builds a currency market for different chains. On Compound, there are currently encrypted token lending markets such as BAT, DAI, USDT, and wBTC, but most of them are ERC20 tokens. The token market to be built on Equibirium not only has ERC20 tokens, but also DOT, BTC, EOS and other public chain tokens. The assets of these different chains can be directly loaned, and lenders can provide DOT to Equibirium's currency market, and borrowers can use DAI to borrow assets from heterogeneous chains such as DOT.
In other words, in Equibirium's lending market, assets between different chains can be directly interoperable, and lending and borrowing can be completed on the same interface, without interacting through multiple dApps.
- Introduction of guarantee mechanism
It is not completely accurate to say that Equilibrium is a cross-chain compound. Because in addition to cross-chain features, Equilibrium’s lending market model has a different design from that of Compound.
The general DeFi currency market has borrowers, lenders, etc., while Equilibrium introduces bailsman, which is similar to the role of guarantor. This is a special design of Equilibrium. Equilibrium has a liquidity pool rescue plan, and all guarantors are unified into a liquidity pool to share risks and losses together.
Bailsman provides assets to ensure the security of the loan, and at the same time, they can also obtain guaranteed income. Equilibrium will unify the various deposited assets of bailsman into a liquidity pool. This is equivalent to turning the different asset portfolios of the guarantor into an asset portfolio that can obtain income. Users who mortgage in the Equilibrium protocol, such as lenders and mortgagers, provide liquidity for the agreement and can obtain income from it. These mortgaged assets become a "bridge" for cross-chain transactions and can also obtain their respective blockchains. The income of pledge in the PoS agreement.
Due to the role of bailsman, the lender is also different from the lender of Compound. In Equilibrium, the lender does not bear the risk of liquidation. The liquidation risk is borne by bailsman, and of course the guarantor also gains additional benefits.
On Equilibrium, for borrowers, they can borrow mainstream encrypted assets to generate synthetic assets or decentralized stablecoins. The interest will be automatically calculated APR. If the borrower defaults, its mortgage assets will be distributed to bailsman proportionally.
To borrow, the borrower first needs to provide collateral assets. Compared with the single-chain lending market, Equilibrium's borrowers can provide a variety of encrypted assets as collateral, and there will be a process of cross-chain packaging tokenization. Users pay different floating rate fees based on their mortgage rate, specific asset portfolio, and volatility risks.
And traders can conduct cross-chain asset transactions, even margin transactions, and cross-chain asset transactions. Under the Equilibrium protocol, users are not peer-to-peer interactions. Whether it is a loan or a transaction, it interacts with the fund pool.