Minterest – Setting new benchmarks for DeFi
Minterest is not just another lending protocol. What sets it apart from DeFi incumbents is that it’s engineered from the ground up to capture the value it generates, and then via its own buy back mechanism, enable users to participate in 100% of this value. A key component to this architecture is its unique liquidation process* which is entirely managed by the protocol rather than engaging external parties who manage these processes.
In the existing architecture of DeFi incumbents, liquidations are undertaken by third parties who operate externally to the protocol in a somewhat predatory fashion. Liquidators are sophisticated users with deep pockets and tend to be professional DeFi investors. Many of them are Venture Capital firms, and while relatively small in number, they have to date, played a significant role in the DeFi universe.
How liquidators operate
Simply put, liquidators wait for protocol borrowers to become under-collateralised. When this occurs, the loan is repaid by the liquidator in exchange for the borrower’s collateral. To incentivize the liquidators to do this, an additional fee is extracted from the borrower through their loan’s conversion being done at substantial discounts to market rates and it is this ‘discount’ which the liquidator earns to incentivize them to participate. The total liquidation fees earned across DeFi are staggering, and this value is captured exclusively by a small number of sophisticated, wealthy users without the general community being beneficiaries and yet, it is the users who create the majority of the protocol’s value.
Leading with innovation
What Minterest does is completely different. To date, no one has figured out how to create an on-chain solvency check and liquidation process that passes the value from the liquidation event back to the protocol’s users. This is a key point of departure for Minterest – where other protocols have this value extracted from the protocol, the Minterest protocol passes the value onto its users. The liquidation function has been built into the protocol, it manages solvency, undertakes liquidation events and rebalances the protocol liquidation pools; constantly autonomously and consistently.
Users participate in 100% of the protocol’s rewards
Since there are no third-party liquidators involved, the protocol is the sole beneficiary of liquidation fees generated from such processes. It then distributes this captured value, in combination with interest rate and flash loan fees, to the protocol’s users. This means that Minterest users participate in 100% of the value the protocol generates, and this results in the protocol delivering superior long term APY/APRs for users, outcompeting all other DeFi lending platforms in
A fairer finance system
So, when it comes to liquidations, how much value are we talking about? Firstly, transparent liquidation data is never communicated by liquidators. The extent of the returns generated requires significant research and a sophisticated ability to scrape and interpret blockchain data, which is expertise that the team behind Minterest certainly has. Competitors publicly state that their protocols earn up to $3M a week in liquidations, and some liquidators to date have earned in excess of $50M.
What’s indisputable is that total annualised fees in DeFi are currently measured in the hundreds of millions. If a protocol’s general community were able to share in this value, ordinary users would have realised significant benefits as opposed to only a small pool of wealthy liquidators. Eliminating this practise is what the Minterest protocol is about, creating a fair and equitable system for all its community.
Transparency from day one
A fair finance system doesn’t need opacity, high ticket offices or impenetrable data, It starts and ends with transparency. This is why Minterest will share all the protocol’s data from day one, since it’s the only way to build and maintain trust, not only in our community but DeFi as a whole.
Transforming financial services across the spectrum
The promise of DeFi will quite possibly transform financial services across the spectrum, and this will benefit everybody. As the iconic documentary “Banking on Bitcoin” stated, “there is an ideological battle underway between fringe utopists and mainstream capitalism”. In DeFi fringe utopists have come and gone and mainstream capitalism has most certainly had a go at the crypto movement. Minterest is designed to do and be something different, DeFi’s Goldilocks of sorts, to sit sustainably in between legacy and innovation.
Minterest is a unique borrowing/lending protocol built by industry leaders to service the billions in Total Value Locked (TVL), in DeFi lending projects, with the specific aim of putting user benefits at its core. It provides users with a decentralised financial platform that is fair and inclusive.
The Minterest protocol has the world’s first buyback mechanism, which automatically passes on surpluses to contributing platform users. This way, users receive protocol rewards on top of industry leading borrowing/lending rates, creating the potential for the highest long-term yields in DeFi. The protocol also has an on-chain treasury which captures and passes on liquidation surpluses with users.
*Note that Minterest’s Autoliquidation Engine has been renamed to Solvency Engine.
10, September 2021