The DeFi lending and borrowing market has grown significantly in volume as new lending protocols continue to attract capital and NFT-backed loans become more popular. According to Dune Analytics, the top three platforms in terms of market capitalization are Aave (AAVE), Maker (MKR) and Compound (COMP). These platforms, however, still are facing issues when it comes to collateral requirements and volatile digital assets.
Hashstack Finance is a DeFi platform whose crypto-native lending protocol, called Open, is trying to provide a solution to collateral requirements, specifically the over-collateralization of loans. Hashstack announced on Monday the release of its closed beta testnet that enables the opposite: autonomous under-collateralized loans. Built on the Harmony blockchain, Hashstack’s Open protocol claims to let borrows take out a loan with an up to 1:3 collateral-to-loan ratio.
According to the company, this means a person can borrow up to $300 by providing only $100 as collateral. Of this, he or she can withdraw 70% collateral, or $70 in this case, while utilizing $230 as in-platform trading capital. Hashstack claimed that DeFi lending tends to be over collateralized and, on average, a borrower provides a minimum of 42% excess collateral against the loan they intend to borrow.
Vinay, Hashstack Finance founder explained, “Today, if you want to borrow $100 on Compound, or Aave, or even MakerDAO, you are required to provide a collateral of at least $142. This breaks the primary intent behind loan procurement, and has restrictive use-cases for the borrower.”
Hashstack can be integrated with other DeFi solutions, such as Pancakeswap, to facilitate in-app market swaps and to improve loan utilization, as stated by the company. This mechanism allows borrowers to swap the borrowed tokens into other primary coins or secondary coins without the need to switch DApps. Open protocol also bridges assets from other chains such as Ethereum and Avalanche C-Chain.
Hashstack’s Open protocol was one of the many approved proposals from Harmony’s $300 million Ecosystem Fund announced at the end of 2021.
15/ @0xHashstack‘s Open protocol is the world’s first autonomous lending framework enabling under-collateralized loans up to 1:3 collateral-to-debt ratio.
— Harmony (@harmonyprotocol) December 5, 2021
Recently, Li Jiang, chief operating officer at Harmony, told Cointelegraph that he believes that “the future is multichain and cross-chain” and the ability to move assets very easily from one chain to another is the key towards mainstream adoption.