7 Reasons Why ADALend📈
Cryptocurrency is the new method of handling your funds. More and more countries and businesses are starting to accept cryptocurrency as a form of payment for various products and services. Bitcoin, Etherium are known to be the leaders in the cryptocurrency market. New tokens are being made everyday, most of them are worthless and a waste of money and attention. Some, though, aren’t. ADA is one of them. They are developing a highly anticipated project called ADALend. It combines cryptocurrency, funding, and personal loans all in one. With a handful of advantages, let’s go through some of the key ones and understand the high value of this project.
When talking about loans, we become hesitant. That’s probably because most loan systems have enormous interest rate fees and are very hard to even get. This brings a major struggle when in the need of funds to start your business ventures or fulfill your financial needs. Well ADALend makes it easier, affordable and even profitable for the customers and holders of the coin. Starting with:…
Interest Rate Strategy📄
ADALend protocol provides a variable interest rate for all the lending users.
For borrowers, the protocol will provide 2 kinds of interest rates — stable and variable rates.
Usually, the stable rate is larger than variable rates, but it’s persistent to the change in interest rates. A stable interest rate is suitable for long-term loans, and variable rates are good for short-term loans.
Both borrowing interest rates and lending interest rates rely on the utilization ratio of each pool. Utilization ratio = total borrowed amounts / total deposited amounts
The utilization ratio will be changed based on the utility of this token and the liquidity mining program supported by the ADALend Governance.
The interest rate curve is different per asset. The optimal utilization ratio for stable coins is high, and the optimal utilization ratio for non-stable-coin is relatively lower.
When the utilization ratio is lower than the optimal ratio, the interest rate grows gently, but it proliferates when it is more than the optimal ratio.
The rapid growth lets borrowers return, and the lenders to lend more until the target utilization ratio is met.
Now let’s talk about:
The lending operation does not have any conditions to meet, and anyone can deposit any amount and get the equivalent value of share tokens.
The redeem operation is to convert share tokens to underlying tokens. As part of this operation, share tokens are burnt, and the underlying token is returned to the user. Underlying tokens are already grown at this time as the share token’s value increases as time passes.
The borrow operation sends the underlying asset to the user when the user’s collateral amount is larger than the underlying asset he wants to borrow.
The repay operation is to pay back the borrowed amount and the interests they need to pay. If the repayment amount is lower than the amount to repay, the borrowing amount is subtracted by the repayment amount.
The liquidation operation is when the collateral amount is lower than the threshold amount based on the borrowed amount for price changes.
The liquidators can safely take out the borrower’s collateral, and the borrower’s loan amount is set to zero, and the collateral is removed.
The flash loan operation is to borrow a high amount of tokens without collateral based on the guarantee that the full repayment with interest will be made on a single transaction.
So all in all this whole project is designed to benefit the coin, crypto market, personal loans and people who want to start earning and being in a trustworthy community with more pros than cons.
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