How will the new dForce protocol connect lending agreements and synthetic assets?

When the currency become many Wall Street institutions, Wall Street's top science and technology of the company's asset allocation, the currency in the capital market can no longer be immune to the small toy from geek, evolved into the global categories of merchandise categories, COINS and tesla stocks of crude oil, gold and other commodities, affects the behavior of investors around the world.

Obviously, bitcoin traders are no longer the exclusive domain of investors in the cryptocurrency industry. US stock commodities and bitcoin have formed a huge investment network, and the allocation of a single asset cannot satisfy investors in any one market.

The trading volume of GBTC in the US stock market reached $400 million in a single day, while in the currency circle, there was also a large demand for US stock commodities. The first trading day when the coin was installed on the line of Tesla Latin American stock token, the trading volume reached $10 million.

And in the booming DEFI field, there is no perfect match for the market categories of commodities trading needs of the product. The dForce team spotted this gap.

Lending agreements and the synthetic asset dilemma

Defi World players have pledged $5.1 billion worth of tokens in MakerDao, one of the largest lending agreements, and lent $3.7 billion worth of stablecoin DAI. To some extent, the loan agreement is the cornerstone of the DEFI world.

Lending agreements can be divided into two categories, one is the agreement represented by MakerDao that only accepts specific assets as collateral to lend stablecoin. The other is the dForce loan agreement, Aave, and Compound, which are used to lend out another asset in support of depositing one as collateral.

Statistically, MakerDAO is in the first tier of loan agreements. However, there is a view that MakerDAO's capital efficiency is not high. MakerDAO's system is called the CDP debt warehouse model, DAI is the only debt in the system, the user's debt and assets are isolated. In other words, Makerdao's mortgage assets are locked assets, unable to participate in borrowing and gain interest income, resulting in huge opportunity cost wasted and low capital efficiency.

At the same time, MakerDAO is designed without considering other legal tender such as euro, pound and synthetic assets such as silver, gold and securities. It only supports the synthesis of the stable currency DAI anchored to the US dollar, which limits the scope of use of MakerDAO. Of course, this also provides opportunities for innovation of other protocols.

In the synthetic asset world, Synthetix is the clear leader. The Synthetix SNX is the primary raw material for synthetic assets and currently accounts for 98.5% of all mortgage assets, meaning that a collapse in SNX prices could send the system into a death spiral. As the movie The Big Short shows, the underlying building blocks are unstable and can cause the entire system to collapse. Cao Yin, Managing Director of Digital Renaissance Foundation, also holds the same view. When SNX price is too high, as long as someone starts to sell, it will immediately cause catastrophic losses and then cause a death spiral, with SNX plummeting and mortgage assets bursting, and SNX plummeting and mortgage assets bursting.

Synthetix's problems didn't end there. Its 700% mortgage rate and closed debt system severely limited Synthetix's capital efficiency and expansion of its money and balance sheet.

The more problems there are, the more space there is in the market. DFORCE has put forward its own solution to solve the current problems faced by lending agreements and synthetic assets.

New protocol for dForce

DForce's new protocol takes advantage of lending, stablecoin and synthetic assets to create synthetic assets that are far superior to existing asset classes from collateral that is far superior to a single asset.

On the raw material side, the dForce loan agreement supports all collateral, and there is no supply cap. This means dForce  The balance sheet can expand indefinitely. In terms of synthetic assets, users can synthesize various fiat anchor coins, bulk commodities such as gold and silver, stock tokens such as Tesla, and index tokens such as SPX, not limited to US dollar stablecoins.

The raw material side has no ceiling and the synthetic asset side is diversified, which means that the DForce loan agreement has a broader space for development. At the same time, the collateral is not idle, can continue to earn interest. The interest generated by the collateral can reduce the cost of capital for participating borrowers.

Of course, the raw material side and the synthetic asset side do not mean that the system is chaotic. dForce  Lending agreements impose different risk, currency and cost policies on different assets. For example, the interest rate curve and collateral rate of synthetic stablecoin and synthetic stock token will be different.

From DForce's past experience, it prefers to launch a one-stop integrated platform with an aggregative nature. The launch of the new agreement also has this property.

Under the new agreement, DForce launches the Creation Capital Pool and the Synthetic Asset Pool. The Creation Capital Pool allows users to deposit collateral and cast synthetic assets. The synthetic asset pool is separate from the creation capital pool and accepts DF tokens, core assets, community-voted whitelist synthetic assets, and LP equity tokens as collateral. Early in the release of the agreement, DForce will disable synthetic asset cross-lending until liquidity stabilizes. In other words, once liquidity stabilises, the margin on synthetic assets will be available for borrowing and trading.

According to the official, DForce will follow up with different pools based on different scenarios. For example, low slip point bulk trading pool, fixed term fixed rate loan agreement and so on. Through the protocol native integration, expand the use of the scene at the same time reduce the user's difficulty in use.

Predictably, the new DFORCE agreement could reduce the global carry trade, while potentially creating a new global interest rate and foreign exchange market. DForce is likely to become a one-stop platform for Defi applications, where user needs can be addressed through the launch of the new pool.

The traditional financial markets and the DEFI world are closing in

In the macro context of global massive release of water, investors in the currency circle need more than crypto assets. Global assets such as stocks and commodities are all high-quality investment targets. From the perspective of the development of the platform, it is an irreversible trend for global assets to be traded on a single platform.

FTX, Binance follow the trend of the launch of equity tokens, DEFI Mirror Protocol is also betting on the equity token field. While the equity token field is booming, the project development of DEFI field is being segmented, such as fixed interest rate fixed term lending, large stablecoin swap and other segmented fields.

DForce's new protocol, which combines loans, stablecoins and synthetic assets, suggests that the real goal is to integrate global capital markets, not just equity tokens. If DForce's synthetic asset protocol multi-pool model is successful, then DForce could be the first protocol to have both breadth and depth in the DEFI space.

In the context of "everything is tokeable", the new financial market created by DEFI could fundamentally alter incentive schemes and change the way we live today.

Currently, DForce has hired four of the world's top audit firms to conduct code audit of the loan and synthetic asset agreements, including Trail of Bits, CondensSysDiligence, Certik, and Certora (Formalized Verification), and set strict risk control parameters for different assets. And enable 24/7 off-chain monitoring system.

Of course, DForce is not the final form of Defi's product, and in a rapidly changing capital market, there will be more and more products like DForce and more sophisticated investors.

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