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Pantera Partners: Excerpting the Boca Ecological Defi Currency Market Parallel

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Parallel Finance is a new decentralized currency market on the Boca and Kusama blockchains, and the agreement aims to bring more liquidity to the Boca /Kusama ecosystem.

原文标题：《 Decentralized Money Market 》

Paul Veradittakit, Founding Partner, Pantera Capital

原文编译：卢江飞，链闻

Parallel Finance, a decentralized money market based on the Polkadot blockchain, recently closed a seed round led by Pantera Capital, Partners include Polychain Capital, Lightspeed Venture Partners, Breyer Capital, 8 Decimal Capital, and Hypersphere Ventures.

• Parallel Finance 是波卡和 Kusama 区块链上的全新去中心化货币市场，该协议支持两个关键功能：借款和贷款。

• 如果要借出资产，用户可以将资金存入 Parallel Finance 任意一个资产池（目前支持的代币包括 DOT、xDOT 和 USDT），然后根据他们在资金池中的所有权比例、以及特定资金池对协议总供应量的贡献，根据这些资产获得利息。

• 如果要借入资产，用户必须存入一些资产作为抵押品，而且必须超额抵押才能获得贷款，即抵押品价值要大于借款人打算借入的金额。然后，用户就可以从任意一个波卡资产池借款，并按照基于算法计算得出的利率支付利息。

• 在波卡等权益证明区块链上，DeFi 存在一个关键限制，即：用户必须在抵押代币（通过验证新区块获得区块奖励）和借出代币（从货币市场赚取利息）之间做出选择。在这种情况下，区块链整体安全性（需要质押足够的代币）和 DeFi 协议资本效率（需要充足的代币供应）之间就会产生紧张关系。

• Parallel Finance 允许用户同时抵押和借出他们的资产，也就是说，用户即能支持网络安全、同时又可以参与 DeFi 并获得更高的奖励回报。用户可以将区块链的质押代币（例如 DOT）存入 Parallel Finance 的账户，Parallel Finance 就会代表他们进行质押，并向用户支付相应的区块奖励。作为交换，用户会收到一个 voucher token（例如 xDOT，这是一种期货代币，可以在未来以 1:1 锚定汇率兑换 DOT），然后只需将这个 voucher token 提供给 Parallel Finance 货币市场，就能从用户自己质押的相同资产中赚取利息收入。

• Parallel Finance 的去中心化治理模式以该协议的原生代币 PARA 为中心，PARA 代币持有人可以提出公投、协议升级、参数调整等要求，也可以对其他人提出的治理行动进行投票。PARA 代币分配细节会在主网启动之前公布，旨在确保协议长期安全稳定，并以去中心化的方式运作且得到更好的维护。

• 随着以太坊日益普及，基于以太坊的 DeFi 用户面临的困扰也逐渐增多，比如交易费用越来越高。在这种情况下，替代区块链上的 DeFi 成为了业内一个有趣的探索领域。通过将去中心化货币市场与委托质押机制相融合，Parallel Finance 使用户即能获得区块奖励，又能从代币中收到利息收入，为波卡和 Kusama 上的 DOT/KSM 持有者积极参与 DeFi 创造了巨大激励措施。最终，势必有更多新的流动性来源被吸引，也将进一步推动 Parallel Finance 成为波卡 /Kusama 区块链上蓬勃发展的 DeFi 生态系统主要参与者之一。

What is Parallel Finance?

Parallel Finance is a new decentralized currency market on the Boca and Kusama blockchains, and the agreement aims to bring more liquidity to the Boca /Kusama ecosystem. With the increasing number of decentralized applications eager to build on alternative blockchains and the increasing borrowing needs of Poka /Kusama asset holders (e.g., DOT/KSM), Parallel Finance is a better solution. The protocol test network is available online and can be accessed here.

At a high level, the protocol supports two main functions: borrowing and lending.

In order to lend assets and earn interest, users can deposit their funds into any of the Parallel Finance lending pools, of which there are currently three: DOT, XDOT, and USDT, interest on each loan pool is generated based on a specific asset rate, which is determined by an algorithm based on the degree to which each loan pool contributes to the overall supply of the agreement and borrowing liquidity. All the total interest earned is then distributed to the liquidity providers in each pool in proportion to the ownership of each pool.

In order to borrow assets, users must first deposit some assets into the Parallel Finance agreement, which will be used as collateral. To get a loan on Parallel Finance, you must overpledge, meaning that the value of the collateral is greater than the value of the asset the borrower intends to borrow. In addition, the Parallel Finance agreement also sets a "borrowing limit" for the user, which is the maximum amount of money a user can borrow from Parallel Finance. The "borrowing limit" is also determined by the algorithm. Calculated largely on the basis of the "loan-to-value" ratio of the pool of assets chosen by the borrower, this means that the more debt a user pays into a Parallel Finance agreement, or the higher the value of the collateral they deposit, the larger the "borrowing limit" will be. Once you understand this, you can borrow from the three asset pools in Parallel Finance (DOT, XDOT, and USDT).

It should be noted that as asset prices fluctuate, the loan may become undersecured, threatening the short-term financial solvency and long-term financial solvency of the Parallel Finance agreement. To control the problem, Parallel Finance sells users' collateral at market prices in the form of settlement discounts when the value of their collateral is lower than the value of the assets they borrowed. This encourages arbitrageurs to buy quickly. This not only helps effectively eliminate the risk of the borrower in the agreement, It also allows the Parallel Finance agreement to reduce the loan-to-value ratio below 100%. Cash discount Cash discount is a discount given by the seller to encourage early payment within a given period of time.

How is the Parallel Finance protocol optimized specifically for the Boca ecosystem?

Today, the vast majority of DEFI protocols are hosted on Ethereum, and there is one major difference between Poca and Ethereum -- Ethereum uses a proof-of-work (PoW) consensus mechanism to secure its network, while Poca uses a proof-of-stake (POS) consensus mechanism. In the Proof of Interest consensus, a block validator must "pledge" or lock tokens (such as DOT) on the chain to be eligible to validate a new block. In general, the chance that a verifier will be selected to verify the next block is proportional to the number of tokens they pledge.

To encourage more people to participate in the verification of blocks, verifiers can receive block rewards from the Proof of Interest blockchain network. In this sense, a token pledge can also be viewed as an investment: the verifier only needs to invest (or pledge/lock in) the asset in return for a return (block reward). However, the assets that have been pledged often cannot be used for any other purpose, resulting in a virtual illiquidity once the token is pledged, meaning a competition between the loan agreement and the proof-of-stake blockchain has been created. Based on the current block incentives and interest rates, token holders have to make a decision in one of two situations:

• 要么抵押资产并获得区块奖励，

• 要么将代币提供给 Parallel Finance 等借贷协议并获得利息收入。

In turn, fluctuations in block rewards and interest rates threaten the overall security and liquidity of the network:

• 如果区块奖励较低，代币持有者会被激励去质押并借出他们的资产；

• 如果利率较低，代币持有者会被激励质押他们的资产，从而减少链上整体流动性。

One of the main features of the Parallel Finance agreement is to allow token holders on Poka and Kusama to pledge and lend their assets at the same time. To do this, token holders can deposit their assets into a Parallel Finance account, in exchange for which token holders receive a "voucher". For example, DOT token holders can deposit their DOT tokens into a Parallel Finance agreement and in exchange, they receive XDOT tokens (XDOT is essentially a "futures token" that can be exchanged for DOT at 1:1 at some point in the future). Essentially, the Parallel Finance agreement represents users pledging their assets while nominating their own validators and paying block rewards accordingly. In this case, users can offer their Xdot tokens to Parallel Finance's Xdot lending pool, earning interest income on their assets at the same time. The Parallel Finance protocol is definitely an attractive option for users who want to mortgage or lend assets (they can now pledge assets, participate in DEFI and get a higher reward rate). It will also bring more liquidity to the Poka /Kusama blockchain while ensuring the security of the underlying blockchain.

How is the Parallel Finance Agreement governed?

At the heart of the Parallel Finance protocol's decentralized governance structure is the original token: PARA. Para holders can propose a variety of governance actions (including referendums, network upgrades, election of board members, parameter adjustments, etc.) and can also vote on proposed governance actions. The full supply of PARA tokens will be minted before the main network is started. The token allocation strategy aims to ensure the long-term security and stability of the protocol, and to operate in a decentralized manner and be better maintained.

The Parallel Finance agreement also maintains a "Treasury" that is overseen by the Board of Governors (a group of management members elected by Para token holders). Parallel Finance charges a small fee for each loan transaction executed under the agreement, all of which goes into the 'Vault' fund and teams can make suggestions on how to use/spend the funds (e.g., setting up a new J trading market, upgrading some aspects of the agreement, etc.) The Council would then be responsible for approving or rejecting the recommendations.

Final Thoughts

As the Ethereum blockchain has become increasingly saturated, network transaction times have become extremely slow and prohibitively expensive, making it difficult for mainstream users and upstart crypto enthusiasts to participate in Etherium-based Defi. In this case, an alternative to Defi on the blockchain becomes an interesting area to explore. These alternative blockchains are often more interoperable (e.g., Poca) and specialized (e.g., Kusama), expanding the range of financial use cases that the DEFI protocol can capture. Unfortunately, these newer blockchains often suffer from a relative lack of liquidity, which makes it extremely difficult to build and maintain capital-efficient DEFI protocols on these alternative blockchains.

Parallel Finance is one of the most compelling decentralized money market solutions that brings more liquidity to the Boca /Kusama ecosystem. The agreement combines decentralized lending agreements with entrusted mortgage mechanisms, allowing users to pledge and lend assets simultaneously. In order to receive network block awards and DEFI protocol interest income. In the end, the Parallel Finance agreement could create a huge incentive for DOT/KSM token holders on Poka and Kusama to actively participate in DEFI, but it would also help them double their income. As the Defi ecosystem on the chain continues to grow, the Parallel Finance agreement helps to introduce new liquidity and will further propel the agreement to become one of the major players in the thriving Defi ecosystem on the Boca /Kusama blockchain.