Hashstack launches open-protocol testnet, offering under-collateralized loans
The DeFi lending and borrowing market has grown significantly in volume as new lending protocols continue to attract capital and NFT-backed loans become more popular. According to Dune Analytics, the top three platforms by market capitalization are Aave (AAVE), Maker (MKR) and Compound (COMP). These platforms, however, still face issues when it comes to collateral requirements and volatile digital assets.
Hashstack Finance is a DeFi platform whose crypto-native lending protocol, called Open, attempts to provide a solution to collateral requirements, specifically over-collateralization of loans. Hashstack on Monday announced the release of its closed beta testnet that enables the opposite: under-collateralized standalone loans. Built on the Harmony blockchain, Hashstack’s Open protocol claims to allow borrowers to take out a loan with a collateral-to-loan ratio of up to 1:3.
According to the company, this means a person can borrow up to $300 by providing only $100 as collateral. Of this amount, he or she can withdraw 70% collateral, or $70 in this case, while using $230 as trading capital on the platform. Hashstack claimed that DeFi loans tend to be over-collateralized and, on average, a borrower provides a minimum of 42% excess collateral over the loan they intend to borrow.
Vinay, Founder of Hashstack Finance, explained, “Today, if you want to borrow $100 on Compound, or Aave, or even MakerDAO, you need to provide collateral of at least $142. This defeats the main intent behind obtaining loans and has restrictive use cases for the borrower.”
Related: Genesis Provides $6 Million NFT-Backed Loan to Meta4 Capital
Hashstack can be integrated with other DeFi solutions, such as Pancakeswap, to facilitate in-app market trading and improve loan utilization, as the company reports. This mechanism allows borrowers to exchange borrowed tokens for other primary coins or secondary coins without having to switch DApps. The open protocol also links assets from other chains such as Ethereum and Avalanche C-Chain.
Hashstack’s open protocol was one of several approved proposals from Harmony’s $300 million Ecosystem Fund announced in late 2021.
15/ @0xHashstackThe Open Protocol is the world’s first stand-alone lending framework allowing for sub-collateralized lending up to a 1:3 collateral-to-debt ratio.
— Harmony (@harmonyprotocol) December 5, 2021
Related: What is the Harmony (ONE) blockchain and why is it so popular?
Recently, Li Jiang, COO of Harmony, told Cointelegraph that he believes “the future is multi-chain and cross-chain” and that the ability to move assets from one chain to another very easily is the key to widespread adoption.