Relite Finance — A Cross-chain Money Market Protocol
“In character, in manner, in style, in all the things, the supreme excellence is simplicity” ― Henry Wadsworth Longfellow, Favorite Poems.
If you’re reading this article, you’ve most likely heard about decentralized finance (DeFi) at this point. Decentralized exchanges (DEXs), stablecoins, lending, borrowing, margin trading, payments, insurance, gaming, prediction markets, wrapped Bitcoin, NFT markets — all of these have DeFi elements to them now.
One of the fastest-growing of these sectors is lending and borrowing. At time of writing, the total value locked (TVL) in DeFi is over $112 Billion. That means $112 Billion worth of crypto assets are locked up in smart contracts. Of that, more than $45 Billion is locked up just for lending and borrowing (~40%).
Those are some impressive numbers. But how does that compare to the legacy lending market?
In 2021, the global lending market is predicted to reach $6.9 Trillion. The value of consumer loans with all commercial banks in the U.S. is around $1.5 Trillion. As it stands now, the TVL for DeFi would have to more than 10x to equal a subsection of the lending market of a single country. The space is still growing, but there is a long way to go before DeFi captures more market share. Degenerates “aping” into lending and borrowing with reckless abandon is only going to take things so far.
So why take part in DeFi lending?
There are legitimate reasons to participate in the process and borrow or lend crypto assets.
- Competitive interest rates
The greatest thing about DeFi is the removal of excess parts and positions. Platforms avoid extra costs by utilizing the internet and keeping everything on smart contracts instead of paying intermediaries. These cost savings translate to lower interest rates for borrowers.
- Leverage your assets for speculative trading
You can borrow against your collateralized assets without losing them and you don’t have to keep them on a centralized exchange. You can then buy more crypto assets with the borrowed funds.
- Short hedge
If history is any indicator, the market will go into another bear cycle at some point. You can borrow a stablecoin against your assets as a hedge, without leaving them on a centralized exchange or having a stop loss out there for whales to hunt.
- Get fiat without losing your assets
Life will still happen to you, and sometimes that requires paying bills. You can borrow against your crypto to get fiat without giving up your assets. This is great if it’s still a bull market, and you’re confident the price of the assets will continue to rise. In some places, this can also help to protect you from capital gains taxes since you’re not selling your crypto, but check your local regulations to be sure.
- High returns for lending
Lending stablecoins like DAI or USDC can net returns anywhere between 5 and 13%, but rates can go up as high as 30% for other tokens. Plus, some platforms might give you native token rewards on top of that, which could compound returns if that token price appreciates.
- Collateralized Loans
An estimated 5% of borrowers getting unsecured loans through U.S. financial tech services end up defaulting. DeFi pools require enough collateral from borrowers to make sure the lenders don’t get stuck eating the loss.
- Decentralized, trustless systems
The DeFi platforms are built on smart contracts, so no intermediary charges extra fees or decides whether you qualify. No credit checks, statements of loan purpose, or inherent biases to worry about. If done right, DeFi will also create a peer-to-peer network more resistant to global drawdowns and superior to the current “hub and spoke” model that allows a few central banks to infect the whole.
These are all great attributes of DeFi lending and improve the traditional systems in place. However, centralized lending will keep the lion’s share of the market as long as it’s more convenient for the average person to interact with that system. Whether it’s in the form of high rates or an increased chance of loss, most people are willing to pay a “convenience fee” for ease of use.
Pain points exist at almost every stage of the current DeFi lending process.
- Wallets and user interfaces (UIs) are cumbersome and can lead to user mistakes.
- DeFi lending terms are becoming as harsh as traditional markets.
- Steep learning curves scare away most people or push users towards predatory centralized lenders.
- Lack of interoperability across chains limits the types and amounts of usable collateral.
- High fees plague the networks and drive up transaction costs.
It’s hard to imagine a world where millions, if not billions, of people use DeFi services when the current process is stressful, expensive, and easily liquidated.
Relite Finance Brings DeFi To Everyday Users
Relite Finance is a decentralized cross-chain lending platform looking to overcome the current problems with DeFi and promote mass adoption with fair, affordable terms and a simple UI that guides you through the process.
The team is working to optimize what they consider the three most essential pillars of DeFi: Interoperability/Scalability, Sustainability/Over-collateralization, and Simplicity.
Work Cross-chain to use multiple native tokens
Current DeFi platforms can be very limited in their offerings. Coinmarketcap.com has ~9500 different cryptocurrencies listed on its website, with the top 150 tokens all having market caps over $400 million. Many crypto holders are being neglected when platforms only transact with a small part of what’s available.
Even if you do have some assets you can lend or borrow, the networks get bogged down by increased volume, which leads to failed transactions, slow confirmation times, and increased gas fees. This is a guaranteed way to scare off most people.
The Relite lending platform will be built on the Polkadot blockchain, which means you will have a lot more flexibility in the digital assets used for borrowing and lending. DOT, ETH, ERC-20 tokens, other major blockchains’ assets, and even NFTs will be utilized in the ecosystem.
With Polkadot as the underlying blockchain, the platform will be able to scale up to as many as 1000 transactions per second (TPS), which significantly reduces gas fees and allows for reasonable pricing of services. This will help to grow the platform and encourage many daily transactions.
Fair fees and interest rates for borrowers, ROI for lenders
Many services require incredibly high collateral amounts to get a loan. The minimum rates are ~150%, but some can exceed 350%. Lenders shouldn’t be stuck holding the debt if the market plummets, but those kinds of rates price many people out of participation.
Relite solves the over-collateralization problem with their one-of-a-kind reserve fund and the use of maturity contracts.
The reserve fund acts as a safety net to help prevent immediate liquidations by giving a pool of funds to tap into during market shortfall events.
When liquidations do occur, the fund covers a portion of them by selling RELI tokens on Uniswap — e.g., 97% of loan value will be liquidated, and 3% will be covered by selling the necessary amount of RELI tokens. Because the fund can cover part of the liquidation, Relite can offer better collateralization rates.
The fund helps maintain the network’s security, ensuring lower fees and better returns in the long run. Users will be incentivized to stake in the reserve fund by getting rewards in RELI tokens.
The platform will also use loan maturity contracts to ensure borrowers know exactly when loans need to be repaid. Instead of a nebulous timeframe that could see the more reckless or inexperienced try to hold through a blowoff top and into the next bear cycle, a set payback date will be in place so lenders’ money and borrowers’ collateral can be freed up to move in accordance with the market.
A variety of fixed-term and non-fixed pools backed by the maturity contracts will give flexibility to users. This will also provide the option of a stable APY so users can factor in the exact amount of interest to be paid back when the contract expires.
Easy to use UI for newcomers
As mentioned earlier, it’s human nature to want things simple, and people will pay a convenience fee for ease of use. User experiences need to be seamless and straightforward if DeFi projects hope to have a chance against centralized financial institutions.
Major banks and fintech companies have created apps that are easy to use and have become a one-stop shop for banking, borrowing, investing, and even financial education. Modern people are busy and distracted every day. They don’t want to feel like they need courses in market trading, programming, and blockchain to use DeFi apps. They’ll get a couple of steps in, then decide a bank app is way easier to use and stick with the incumbent service.
The Relite team understands this and kept simplicity and usability at the forefront when designing their platform. With only three clicks, users can access DeFi services, deposit assets for liquidity, or provide collateral to access a loan. And to make sure nobody gets confused, a how-to guide is embedded in the UI to answer questions along the way. You get cross-chain token access, borrowing, lending, staking, and governance through a single protocol that guides you through the entire process.
The RELI token is the native token of the platform and will be the primary token used to add liquidity to the relief fund. The total supply will be 182 million tokens, with an initial supply of 14 million.
It will also act as a governance token, serving three main purposes.
Relite will have a DAO structure where the community decides on future implementations, fees, and timing of implementations. Token holders will vote on new products, token utility, and blockchains to be added.
- Rewards/Liquidity Mining
Users are rewarded for staking RELI and participating in the ecosystem. Lenders and borrowers will receive RELI tokens, with rewards distributed daily.
Holders can stake RELI in the reserve fund, enabling additional rewards while improving the protocol’s security. Users who stake their tokens in the reserve fund receive payouts from the loan margin proportional to their stake. Even novice users will be able to stake assets through the easy-to-use interface and track real-time earnings with ease.
Invest in Relite Finance ($RELI)
- Simple to user interface will promote mass adoption.
- Competitive rates for lending and borrowing will bring in more users.
- Being built on the Polkadot blockchain will allow for scalability and keep gas fees low.
- Token staking combined with low total supply with promote token price appreciation.
To date, the crypto space has been unforgiving of user mistakes. This is especially true for DeFi. An elegantly simple protocol that allows people of every background and experience level to participate in this burgeoning financial system is sorely needed and will be crucial for propelling this tech toward mass adoption.
Relite Finance provides the platform that gives DeFi a chance at being a serious contender in the multi-trillion-dollar global market.
Written by Jason Lee
About Relite Finance
Relite Finance is a cross-chain money market protocol built on Polkadot. The protocol will enable users to lend, borrow, and stake all crypto assets through one simple interface.
Find out more at:
Telegram: Relite Finance Official
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