Piggy Finance will provide a new paradigm for collateralization capital efficiency
The borrowing and lending landscape in the DeFi economy is marred with challenges that are yet to be fully addressed. Key among the challenges is high collateralization, which makes borrowing and lending a cumbersome endeavor for the more significant majority in the market.
Because of desired profit margins, some DeFi and DEX platforms opt to use centralized solutions for decentralized problems resulting in high collateralization in the market. Thus, it becomes harder for the market to access liquidity or loans as they are required to secure their borrowing with twice or even thrice as much as the value of the loan advanced.
The high collateralization is also an effect of protecting the investor/lender. In most cases, the higher collateral safeguards against possible defaults, ensuring that the lender will always get back their principal amount at the very least. Introducing Piggy Finance. Based on Liquity, Piggy Finance is Binance Smart Chain’s newest decentralized lending protocol with crucial features improving on an area of the BSC ecosystem which has thus far truly failed to fly!
Binance Smart Chain ecosystem has a lending problem
For borrowers to access funds, lenders must provide them. Platforms offer specific benefits and privileges to lenders to entice them to provide tokens to potential borrowers. Part of the benefits include profits following proceeds from the borrowing activity in these platforms. In case of a bad loan, these platforms auction the collateral provided by users to pay off lenders.
In theory and for centralized institutions, this works well; however, the dynamics of the decentralized market complicate its implementation. For instance, Binance Smart Chain’s Venus Protocol suffered massive losses following what seems to be price manipulation of the native XVS token. The token experienced a significant rise in value, which meant users could borrow more using XVS as collateral.
Unfortunately for Venus, XVS dropped in value instantly, and borrowers were forced to default on their loans, prompting Venus to start auctioning their collateral. Even with 100% conversion, Venus would still suffer losses owing to the reduced value of the collateral provided, and in the aftermath, suggested a possible 200%+ future collateralization requirements!
The Venus incidence shone a light on an extreme disparity in the BSC ecosystem and suggests that a more robust method of value preservation is required to assure lenders of the safety of their staked tokens. It also indicates a possibility of a governance attack by community members to influence the value of native tokens in platforms while leaving a trail of unfair destruction in their paths.
Demerits of high collateralization and interest rates
As mentioned earlier, high collateralization and interest rates can lead to massive losses for platforms. Users can decide to be creative and manipulate the platform for their gain.
In addition to this, high collateralization discourages borrowers from actively participating in the market. As platforms target to generate maximum revenue per client, they create DeFi systems that lock out a majority of the market from participating, which is entirely against the decentralized ethos in which DeFi predicates itself.
Filled with a general reluctance to lend or borrow, the market cannot trade effectively, hindering the adequate movement of tokens within the blockchain economy. The overall effect is reduced uptake of blockchain and its related technologies due to inherent inefficiencies.
Piggy Finance is BSC’s newest lending star
PiggyFinance is a borrowing/lending protocol with a unique platform offering interest-free loans that are efficiently collateralized and are backed by $BNB. Borrowing takes place through $PUSD, the native stablecoin of our platform. Piggy Finance’s entry into the BSC system arrives at an opportune moment when DeFi is permeating more profoundly into the market, and borrowing/lending solutions are in high demand.
The main point of difference between Piggy Finance compared to other existing solutions is the instant liquidation and elimination of lengthy auction procedures. Piggy Finance can achieve this feat through its Piggy Bank feature and stability pool feature, which is the first line of defense in maintaining the system’s solvency.
The Piggy Bank acts as a platform where users can borrow efficiently and effectively. Users borrow in $PUSD and provide collateral in the more established $BNB. The ratio of these two assets determines a user’s collateral ratio, which is updated when the debts increase or when they are paid off.
When a Piggy Bank is liquidated (when users default on their loan), an amount of $PUSD equivalent to the remaining amount of the loan is burnt from the stability pool balance to pay off the debt. The stability pool gets its funds from stability providers. Stability providers may lose pro-rata shares following liquidation; however, they gain pro-rata share from the liquidated assets obtained. Therefore, they stand to achieve a higher dollar value through their liquidity provision.
Unlike regular auctions, this system assures lenders that their staked amount is safe as they are given priority in case of a borrower default. There are no uncertainties surround liquidation as it is instantaneous.
Our collateral-efficient borrowing allows for widespread involvement
The existence of Piggy Finance’s solutions could potentially influence the adoption metrics of blockchain technology. It has already presented its value to the DeFi economy, which is crucial in its history. By providing a more user-friendly borrowing system, the platform can invigorate the economic activities in DeFi and the more significant blockchain market.
Piggy Bank, Stability Pools, and Staking Pools are all progressive features that mirror the dynamic demands of the growing DeFi market. As more users borrow, platforms such as Piggy Finance can define the borrowing landscape in the cryptocurrency industry.
We are launching our new LP-Pools!
In order to stabilize the token price and provide additional liquidity, we are launching two additional LP Pools: PUSD/ BUSD, and PIGGY/BNB, stake and earn reward in PIGGY!
You can go to DODO to add the liquidity corresponding to the pair. After you get the LP Token, you can come to the platform’s official website for liquidity mining.
Stay tuned for more details.
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