Allows a BTC collateral wrapped with a USDC loan
In the wake of its latest rebranding, Hifi stereo (formerly Mainframe), today launched its Fixed Rate Cryptocurrency Lending Protocol, which allows anyone to create fungible debt securities on the ethereum blockchain. Fixed rate loan options give investors the ability to better define finances and trading strategies. Additionally, the HiFi protocol reduces collateral requirements for cryptocurrency lending and removes barriers preventing highly volatile assets as potential collateral pairs for crypto lending and borrowing applications. Initially, HiFi offers a USDC stablecoin loan with a WBTC (wrapped Bitcoin) collateral, and the HiFi team plans to quickly add products and services to expand lending markets and collateral pairs.
“Fixed rate loans are a big step for DeFi,” said Doug Leonard, CEO of HiFi. “Investors and traders need less volatile options so that they can plan their finances, have spending predictability, and hedge their investments with certainty. With the increase in DeFi lending activity, protocols like Aave have attempted to ‘Offer loans at stable rates. However, market volatility has reduced the value of these “stable” rates, as borrowers incur fees to maintain a semi-fixed position. “
Amidst the dramatic volatility of the cryptocurrency markets, developers have struggled to maintain a balance between demands for collateral and incentives for borrowers and lenders. Yet decentralized finance (DeFi) markets have reached a valuation of over $ 40 billion. The HiFi protocol automates incentives in a perpetual balancing exercise that maximizes value for all parts of the lending process.
HiFi works by automatically adjusting the incentives between borrowers, lenders and guarantors, each representing a distinct and complementary position of economic exposure. Borrowers deposit collateral and tokens, representing a debt instrument. Lenders buy nominal debt securities, usually at a reduced price, and redeem them for their face value at maturity. Going forward, the protocol will allow guarantors to purchase collateral at a reduced price when collateral accounts do not meet the collateral requirement.
“HiFi opens up decentralized lending to a whole new world of diversified debt markets,” Leonard said. “Fixed rate loans, especially for volatile assets, allow traders to take more aggressive positions and reward all parties involved in the process with a better return on investment.”
The HiFi Lending Protocol allows anyone to create fungible chain bonds economically similar to zero coupon bonds. Tokenized debt securities are backed by excess collateral that is escrowed in Ethereum smart contracts that are audited and viewable by the public. A new system of incentives, including penalties, discounts and arbitrage opportunities, protects the sub-warranty protocol. Future compatibility with other DeFi primitives will allow participants to earn revenue from multiple DeFi protocols at once. HiFi tokens align the incentives of each stakeholder, balance the participation of ecosystem members, and provide some desirable benefits within the system.
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