Yupana.Finance, the open-source, decentralized, and non-custodial lending protocol on Tezos, was launched on the mainnet.
We would like to thank our wonderful community for all the help with the platform’s extensive testing. We have received a lot of valuable feedback and have improved our product enough to feel comfortable presenting it to the wider public. But despite the fact that testing is over, your feedback will always be welcome.
Now let’s get into the details. What is a lending protocol, what are its use cases, and how does it work? In this article, we will answer all of these questions.
What is a DeFi lending protocol and why is it lucrative?
DeFi lending protocols are trustless platforms fueled by smart contracts that serve two main purposes: lending and borrowing cryptocurrency without an intermediary.
Users of the Yupana protocol can be divided into three interdependable categories: Lenders, Borrowers, and Liquidators.
Lenders provide liquidity to the protocol, receiving passive income, while borrowers take out overcollateralized loans. The third group, named Liquidators, is incentivized to liquidate positions with insufficient collateral and keep the platform running.
Lending assets to others is beneficial in a classic way: lenders accrue interest on their deposits with tangibly decreased risk. Putting one’s assets to work, for example, in a liquidity pool is always at risk of possible pool depletion and impermanent loss. But when you lend, you always get your exact deposit back.
When lenders supply their assets to the lending pool, they receive an equivalent amount of yTokens (Yupana liquidity shares) in exchange. yTokens can be transferred as long as they are not used as collateral on the platform (lenders can also take out loans using their deposits as collateral).
At the same time, borrowing assets is a go-to tool for traders and DeFi enthusiasts.
Bulls love borrowing assets because swapping an asset is, for all intents and purposes, the same as closing a long position and losing potential future profit. In lending protocols, users may borrow liquidity without selling their assets and use the borrowed funds in other DeFi projects. Thus, expanding their financial activities without selling any assets.
Bears play their own fun, albeit risky, game of shorting. Borrowing an asset they expect to drop, selling it immediately, and then re-buying it at a lower price later is the closest thing to conjuring money out of thin air.
It is wise to remember that there is always a risk of liquidation if the loan is neglected or the market becomes dangerously volatile.
Finally, we arrive at the third activity favored by some DeFi mavericks: liquidation.
Liquidators help to maintain liquidity on the protocol by buying out other users’ debts at a discount. In other words, they close the debt positions of borrowers when the collateral value no longer properly covers their loan/debt value.
Pay attention: A detailed guide and explanation on how different roles work within the protocol and how to get onboarded, earn a profit, and use other lending benefits are available here.
Yupana supports the following assets at launch: TEZ, cTEZ, kUSD, tzBTC, uUSD, and uBTC.
APY is determined by the market demand for the corresponding asset and can be seen in the Markets section, along with the other relevant stats. A more detailed rundown can be found here.
What are the risks?
There are still some risks as it’s still a decentralized smart-contract fueled platform.
The main risks lie in how robust the smart contracts of both the platform and the assets are.
We have done our best to minimize the risks by only listing assets we trust and by undergoing a full smart contract audit by Inference.
The oracles we use for asset prices are:
- сTEZ contract
If you still have questions or would like to make a suggestion, talk to us via our official channels:
Our blog: https://madfish.solutions/blog