Piggy Finance is DeFi’s most comprehensive borrowing and lending platform
- Volatility is tarnishing the image of crypto as a safe place to park assets and reap returns
- Piggy Finance proves greater stability is possible through its comprehensive portfolio of borrowing and lending services
- Though risks still exist and liquidation is possible if users aren’t careful, Piggy loan products allow for smart leveraging of $BNB to mitigate risk
Current market scenarios have proven that the decentralized finance market has a long way to go before re’aching maturity. Volatility is more of the rule than the exception, with traders (and their investments!) often left at the mercy of ever-changing token prices. Particularly a bear market such as today’s, users need to feel protected while also having the ability to grow their existing portfolio steadily.
For too long, the market has been in dire need of a platform that will inject some stability into crypto markets, protecting users’ investments while also encouraging greater adoption from those who fear crypto’s current instability.
The wait for such a platform is over. Based on Liquity and with BSC functionality, Piggy Finance offers the most comprehensive borrowing and lending services that will go a long way in stabilizing decentralized markets.
Recent markets volatility has liquidated large amounts of capital
The recent waves of volatility experienced in cryptocurrency markets can be characterized as very inorganic. One only has to look at how Elon Musk has been able to sway the prices of Bitcoin and Dogecoin using nothing but tweets, to see how vulnerable many cryptocurrencies are to external factors. Worst of all, it’s not only Musk that holds this kind of power — crypto whales easily influence the prices of digital commodities by either selling their holdings or buying even more.
Another cause of volatility may even be blatant market manipulation, as was seen in the case of Venus (XVS). The protocol, formerly one of the biggest darlings on the Binance Launchpool, ended up losing millions of dollars after what appeared to be a well-orchestrated attack on their network, leading to an abnormal price spike for their native XVZ token. This allowed the perpetrators to borrow $BTC and $ETH using the collateral of significantly lower intrinsic value.
It’s important to note that new tokens (insert ‘shitcoins’ here for the majority of new tokens coming onto the market today) are particularly susceptible to unexpected dynamic price movements. New tokens are rarely pegged to a stablecoin, leaving them wide open to the unsteady hand of market influences.
Volatility is a double-edged sword with very sharp consequences
All of this volatility leads to traders becoming apprehensive, causing a suboptimal flow of tokens within the market. Most notably, platforms with lending pools are likely to be hit harder by market volatility, as participants find it impossible to fully compute the potential losses or gains to be made during volatile periods. Lenders become unwilling to bet on the success of the market, becoming more likely to hold onto their tokens or simply just sell them off. Borrowers would also find it hard to understand such aggressive market trends, becoming less confident about obtaining liquidity.
All this FUD comes at the worst time for cryptocurrency markets — we are closer than ever to crypto becoming an accepted store of value, and to decentralized finance becoming a real alternative to the current outdated models. Yet, all the instability is creating a climate of fear in which crypto cannot come into its own.
Piggy Finance and the $PUSD pegged stablecoin solution
This is where Piggy Finance comes in. To inject some stability into the blockchain ecosystem, Piggy Finance uses an intricate pegging mechanism that ensures borrowing and lending on its platform is protected from volatility. With a steady protocol on which to realize stable gains, users are able to get the greatest benefit out of their $BNB stashes, ensuring their funds are never stagnant even during market downturns or crashes.
The borrowing mechanism works as such:
- Users deposit $BNB as collateral- a more established token, with users getting liquidity in $PUSD.
- $PUSD is pegged to the $USD. Both hard-peg and soft-peg mechanisms are used to create price stability.
- The hard-peg mechanism works so that if the value of $PUSD falls below $1, users can redeem $PUSD for $BNB at face value, such that 1 $PUSD=1 $BNB.
- In addition to this, the minimum collateral ratio of 110% prevents the value of $PUSD from increasing significantly above $1, which could create instability on the platform.
Besides the hard-peg mechanism, Piggy Finance’s soft-peg mechanisms also contribute to better stability in borrowing and lending. One of the many mechanisms is parity as a Schelling point. Since $PUSD is treated as equal to $USD, parity between these two assets is an implied equilibrium in the Piggy protocol.
Another soft-peg mechanism is the borrowing fee for new debts. As redemption of $PUSD increases, the borrowing fees also increase automatically to make borrowing an unattractive option, thus preventing new $PUSD from circulating in the market. This also drives the price of $PUSD below $1, but as the system detects $PUSD below peg, it will drive the price back up to $1.
DeFi’s superior option for borrowers and lenders
With such seamless mechanisms in place, Piggy Finance separates itself from other lending platforms in the market, giving lenders and borrowers alike the peace of mind to keep investing into the market.
Lenders are assured of pegging mechanisms protecting the value of their tokens in pools, that also fulfil a parallel function of protecting the Piggy ecosystem from external market volatility.
On the other hand, borrowers are assured of being able to obtain interest-free loans, with no worries of accruing debt over time. With stability measures in place, borrowers are also safe from repaying higher values than the loan’s principal amount. Yet, as with any borrowing or lending solution, liquidation is still a possibility if borrowers leave their collateral ratio too low. Although Piggy Finance offers the lowest collateral ratio of 110%, it is optimal to keep it around 150% in order to avoid getting liquidated too quickly.
Overall, the protocol’s stability creates a convenience that is unparalleled in the current market. Users need not worry about any volatility in the Piggy Finance ecosystem, encouraging both active trading and long-term participation in the market. Liquidation is only a worry if borrowers get complacent about maintaining healthy collateral ratios. On top of that, Piggy Finance’s native cryptocurrency, Piggy, also offers other revenue generation opportunities for platform users, such as through staking pools.
As more players enter the DeFi space, stability will become ever more important to assure users that their funds are safe while still earning ever greater rewards. For the good of the future of blockchain, Piggy Finance is showing the world that crypto remains a viable and attractive option for you and your funds.
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