DeFi
DeFi lending becomes safer and more sophisticated
Lending is a fundamental cornerstone of DeFi. Crypto users lock assets such as ETH into decentralized lending protocols and borrow stablecoins, which can then be used to purchase more ETH. This can be an effective leverage strategy when the market is rising. However, not all lending protocols are equal: some adopt a unique architecture designed to mitigate the risks associated with lending.
The loan in action
Maintaining a healthy collateral-to-loan ratio allows you to take full advantage of DeFi lending. Millions of DeFi users use lending protocols, even engaging in “loops” by redepositing borrowed funds without encountering problems. Nonetheless, the practice requires constant monitoring to ensure that positions are not under-collateralized.
The alternative lies in solutions that make it easier to grant loans without exposing traders to the risk of having their entire position liquidated if something goes wrong. But how? After all, liquidation is a feature, not a bug. Without this, lending protocols could become undercollateralized and risky behavior would not be penalized.
It’s a complex challenge, but one that requires a cross-chain lending protocol Nolus believes he is under control. Its protocol allows DeFi users to take advantage of leveraged loans without the risk of having their entire position liquidated. Instead, it uses partial liquidations, meaning that if a position becomes undercollateralized, only a portion of the deposited assets will be lost.
Nolus’ flagship product is DeFi Lease. It allows borrowers to obtain up to 150% financing on their capital while accessing underlying leveraged assets via a range of whitelisted strategies. This provides a new DeFi lending solution with a number of unique benefits.
With Nolus, borrowers lock in a deposit in the form of fiat currency, stablecoin or digital asset. In exchange, they receive 150% as a loan in stablecoins, which can be used to purchase the digital assets they desire. This solution offers 3 times the borrowing rate of other crypt® lenders. This is achieved because the deposit, along with the loan, is locked in a DeFi Lease position to serve as collateral. Nolus claims that this method reduces margin call risk by 40% compared to other chain lenders.
One of the advantages of Nolus is that it allows for greater capital efficiency since there is no need to over-collateralize loans to protect against liquidation. As a result, Nolus users can benefit from significantly lower clearance rates than comparable lending protocols. Its partial liquidation engine protects against volatility and total loss of collateral while maintaining a healthy loan-to-value ratio.
Since going live in June 2023, Nolus has processed over $50 million in transactions and has a current TVL of $5 million from approximately 10,000 users.
De-stressing DeFi
DeFi is not supposed to be stressful. It is meant to provide financial freedom by allowing individuals to take control of their finances. This means the freedom to interact with any protocol they want, choose the products and services they want, and of course, select the level of risk they are comfortable with.
Those who want to yOLO and take risks by maxing out and extending their borrowing limits to full capacity are free to do so. Likewise, those who wish to pursue more conservative strategies without risking everything on every trade have this ability.
Nolus can’t stop degens from being degens: some DeFi users will always chase the biggest prizes no matter what, whether that’s ultra-high leverage or eye-watering APYs. But for those less willing to break the bank for leather, Nolus can mitigate the downsides of leveraged loans without limiting the attractive yield benefits. This is the closest DeFi users will get to having and eating their cake.