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Uncover dForce's multi-currency assets and loan agreements

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The highlight of the agreement is that it builds the over-collateralized multi-currency agreement on top of the Universal Lending Agreement and combines it with the fractional reserve algorithm Stablecoin.

DForce's Multi-Currency Assets and Lending Agreements Revealed

Original source: dForce

After more than six months of intensive development, the DForce multi-currency asset and lending agreement will be available at a time soon. The highlight of the agreement is that it builds the over-collateralized multi-currency agreement on top of the Universal Lending Agreement and combines it with the fractional reserve algorithm Stablecoin.

In a nutshell, this agreement is the equivalent of a universal loan + a multi-currency over-collateralized agreement + a partially reserved algorithmic stablecoin.

The Lending Agreement will be issued in several phases: the first phase will be a general-purpose Lending Agreement, the second phase will support multi-currency agreements built on top of the Lending Agreement, and the third phase will include interest income from the multi-currency agreements as a partial reserve for a new algorithm-based stablecoin.

The DForce Lending Agreement is now in the final stage of audit. Following the completion of the code security audit, we will launch the pilot phase at an optional time in February/March (depending on the audit process and final results).

In the first phase, the DForce Lend Protocol focuses on the general functionality, which I will describe in more detail below, and more on the innovations of the Over-Mortgage Multi-Currency Protocol and the related algorithm Stablecoin in a future article.

The dForce loan agreement is a pool-based loan agreement with interest rates adjusted according to market supply and demand dynamics. On top of this, the DForce Lending Protocol adds a number of innovative features.

Highlights of the DForce Lending Agreement

Enhance the risk control model

The mortgage rate of the lent assets

The mortgage ratio (the ratio of loan to collateral value, also known as the reciprocal of the mortgage multiple) is one of the most critical risk control parameters in all loan and loan agreements. However, the loan agreements currently on the market take into account only the risk of the collateral assets, not the risk of the lending assets. For example, if a borrower uses ETH as collateral to lend out 80% of the loan to USDC, it can also lend out 80% of the loan to WBTC. However, we believe that the risk of the latter (lending to WBTC) is higher, as the market risk (price) of ETH and BTC will directly affect the status of the loan. Therefore, we believe that different discount rates should be set according to the different risks of the mortgaged assets and the lent assets. If the borrower lends stablecoin assets, the mortgage rate of the loan is lower than that of the stablecoin assets.

Borrowing/saving caps

The biggest risk of the loan agreement is the risk of unlimited coinage at the asset level. For example, any loan agreement that accepts DAI as collateral would be destroyed if a contract risk arose within Maker that could lead to infinite coins (DAI). The Maker system has a debt ceiling on mortgage assets, but most lending agreements lack a similar mechanism.

DForce's core lending agreement will introduce borrowing/deposit caps at the same time, which can be set differently for each asset. Given that our lending agreement will support a wide range of assets, borrowing/deposit caps will provide additional protection to the system.

Off-chain risk monitoring

Lending agreements are at risk of attack at different levels, and even security audits can't be foolproof. For example, risk on the asset side. For example, in a recent attack on a loan agreement that accepts Cover as collateral, hackers used a loophole in the pledge contract to mint coins indefinitely. Such an attack would spread to all lending agreements that accept Cover tokens as collateral and drain users of their funds, with dire consequences. Our off-chain monitoring system will monitor the coinage, price movements, etc. of the backed mortgage assets, and when an alert is triggered, the system will automatically send the transaction, suspending the relevant (or all) functions of the loan agreement for better control of the situation.

02 Multi - Currency Over-Mortgage Agreement

This is an innovative feature of the DForce Lending Protocol that allows users to use our Universal Lending Protocol to generate stablecoin loans in different currencies with the same collateral asset.

This feature is a standalone over-mortgage multi-currency protocol that builds on top of our core lending protocols. The multi-currency stablecoins minted through this protocol are standard ERC 20 tokens that are 100 percent compatible with all existing DEFI infrastructure.

This feature can support any loan denominated in foreign exchange. According to the opinion of the dForce community, the first batch of whitelist stable assets includes xUSD (USD), xEUR (EUR) and xCNY (RMB), and eventually we will reach the governance decision by way of on-chain voting.

Users can coinage stablecoins in different currencies, including XUSD (US dollar), XEUR (euro), and XCNY (RMB), which are designed to be similar to the stablecoin DAI denominated in different foreign exchange through the pattern of over-collage. The agreement also helps to link the liquidity of the crypto market with the foreign exchange market, enabling a truly global money and lending market that supports multiple foreign currencies. More details on the overmortgage multi-currency agreement will be covered in a separate section.

Public-private pools

A weakness of pool-based lending agreements is that all assets are held in a single pool, assuming all assets are equal (they are not). While borrowing/loan caps can be used to insulate different assets in the same pool to some degree of risk, it is difficult to limit illiquid or alternative assets (such as physical assets such as accounts receivable, residential rental properties).

Compared with digital assets, the vast majority of physical assets have relatively unique risks and liquidity and cannot be simply placed in the same pool. Public-private pools provide customized solutions for different classes of assets and different types of users. For example, separate pools for CEFI operators who trade and lend, and counterparties for CEFI users who are verified by their real names. To better meet such needs, our lending agreements can set different liquidity and risk parameters for custom pools.

Initial public-private pools will likely support pledged assets (such as DOT, XTZ, Atoms, etc.) and may provide unsecured pools under certain conditions.

04 Support flash lending

DFORCE Open Lending Agreement

Flash loans are now a standardised feature of lending agreements, which will also support flash loans and will offer very attractive terms.

05 EIP2612

The DForce Lending Agreement will enforce the EIP 2612 standard, which will simplify the transaction authorization steps and effectively reduce GAS costs.

In addition, we will support more advanced features:

Fixed interest rate and fixed term loans

Fixed rate/term loans will be built on top of the core DForce lending protocol for better risk isolation. We will be able to better control risk in the upper layer agreement (not the core dForce loan agreement) by setting priority/inferiority, loan terms, and debt levels. The bottom loan pool (general loan pool) will provide senior funds and inferior funds (provided by inferior investors) to form a structured capital pool at the upper level, so as to better control the interest rate risk and maturity risk between fixed interest rate and floating interest rate. The structured pool will consist of senior funds provided by the general lending pool and funds to participate in sub-grade investments through the structured pool.

The team is in discussions with community developers to develop the above features. If you are interested, please join the community development. More details on the fixed rate/term loan will be revealed in a separate article - the idea behind the scheme is shown below:

07 Shared credit line

This feature will allow users to share credit lines with others, so that other users can use your line of credit to make loans. In simple terms, users who hold large amounts of collateral and loan lines can offer their lines of credit to other users.

08 Unsecured Lending

Unsecured loan is a structured financial product that combines the core lending agreement of DForce with the traditional P2P platform. The general lending pool will act as the preferred party, providing lower funding costs and a priority return on investment, while the inferior party will bear all the risks associated with the loan agreement. We have a variety of unsecured lending options, and we will announce our foreign cooperation plans at an appropriate time. We have a special phased introduction to unsecured lending.

Above the core functions of introduction of dForce lending agreement. Later in the article, I'll expand on excess mortgage more currency agreement (will be launched in the second phase of the lending agreement), build in excess of the mortgage money agreement on part of the stable currency reserves algorithm introduced (whether the product is still at the experimental stage, release will depend on many factors).