PRESS RELEASE. Lendefi is a brand-new protocol aiming to provide opportunities such as lending and borrowing, leveraging and investing.
Lendefi is an innovative second-generation DeFi lending protocol that allows lenders to earn interest on stablecoin deposits, and for borrowers to obtain undercollateralized loans (UCLs) to invest in popular digital assets.
The main advantage of Lendefi is the possibility of undercollateralized loans, meaning you can borrow more than the collateral (serving as a type of security) you provide. Existing lending protocols, for their part, allow overcollateralized loans, meaning users are limited to less than the value of the collateral when borrowing. The example scenarios below illustrates the difference.
• Undercollateralized: You can provide collateral worth 50,000 USD and borrow another asset worth more than 50,000 USD.
• Overcollateralized: You can provide collateral worth 50,000 USD and borrow another asset worth less than 50,000 USD.
With undercollateralized lending, the borrower can leverage their available capital while pursuing investment opportunities that would previously have been beyond reach. Clearly, this will make digital assets more intriguing to investors accustomed to accessing such mechanisms in traditional markets.
Lendefi vs Compound
Undercollateralized borrowing being the primary point of divergence as compared to other lending protocols, the mechanism of ensuring both parties’ trust is different. While Compound allows loaned assets to be withdrawn, and thus requires overcollateralization to protect the lender from default, Lendefi keeps the collateral escrowed within the protocol.
While the interest rate offered by Compound is variable, Lendefi provides a fixed rate for borrowers and keeps it variable for lenders. Interest rates will be updated periodically by the DAO. Because the costs for borrowing are predictable, and thus easier to integrate into risk management processes or trade calculations than variable rates, borrowers are likely to
