<\/p>\n
Using decentralized finance to take on USD-denominated debt without paying any interest seems like a pie-in-the-sky concept, but it appears that at least one such decentralized lending mechanism already exists.\u00a0<\/p>\n
Recently activated on the THORChain protocol, the tool even reportedly averts liquidations and expirations \u2014 a novelty in crypto\u2019s high-risk, high-reward DeFi sector.<\/p>\n
The service enables interest-free lending against user collateral posted in native layer-1<\/a> assets including bitcoin (BTC<\/a>) and ether (ETH<\/a>), with plans to add more.<\/p>\n A basic explanation of how the system works is laid out on the company blog<\/a>. On the 0xResearch podcast (Spotify\/<\/a>Apple<\/a>), THORChain\u2019s technical lead, Chad Barraford, dives into the details of the lending protocol and the market it aims to address.\u00a0<\/p>\n Barraford says that lending in DeFi is usually a \u201chorrible experience,\u201d adding, \u201canybody who\u2019s taken out a loan on \u2018insert-a-DeFi-protocol-here\u2019 knows how stressful it is and how much it sucks.\u201d<\/p>\n \u201cThe vast majority have variable rate interest rates that could balloon up to 20, 30% in any given moment \u2014 and that\u2019s stressful as all hell.\u201d<\/p>\n Barraford says that so many DeFi borrowers are under stress due to the precarious state of their collateral and the ever-present possibility of liquidation. \u201cThey\u2019re just constantly checking their phone for the price of ETH or the price of whatever,\u201d fearing they might suffer major losses at any given moment, he says.<\/p>\n Barraford explains that the real value of THORChain\u2019s<\/a> lending mechanism is that it\u2019s the \u201cfirst stressless lending protocol.\u201d<\/p>\n \u201cYou know what the interest rates are going to be. It\u2019s zero percent,\u201d he says. \u201cAnd you know that you\u2019re not going to get liquidated. So you can come back in 30 years if you want to, and get back your ETH or get back your bitcoin.\u201d<\/p>\n Barraford anticipates crypto holders to use the protocol to \u201cbuy a car, or buy a house, go on vacation,\u201d or doing something \u201creal\u201d with their assets to \u201cimprove quality of life in one form or another.\u201d<\/p>\n It appeals to a different kind of user than the average \u201cdegen\u201d DeFi<\/a> user, Barraford says, who presents a much riskier profile. He expects to see long-term holders using the service as opposed to \u201csomebody looking to leverage themselves up over the next two weeks.\u201d<\/p>\n While THORChain\u2019s initial design focused strictly on swapping assets in a decentralized environment, Barraford expects more use cases to be developed that diversify the protocol\u2019s services.\u00a0<\/p>\n \u201cIn the early days, it made sense to use it for swapping. It was the most immediate use case,\u201d he says. \u201cWhen the internet first was invented, the most immediate use case of the internet was email \u2014 sending little digital letters to people across a series of tubes.\u201d<\/p>\n \u201cThat was the original use case for the internet, but it doesn\u2019t mean that that\u2019s the only use case for the internet.\u201d<\/p>\n Barraford points to technical advantages of THORChain including its cross-chain capabilities, the lack of MEV exploitation<\/a> and a \u201cslip-based fee model,\u201d which he says is \u201crevolutionary, in terms of how it works.\u201d\u00a0<\/p>\n \u201cIt would be a shame to take such advanced technology and just apply it to one particular use case when it\u2019s so possible to do so many other things.\u201d<\/p>\n \u201cThe important thing,\u201d Barraford says, \u201cis that when you\u2019re trying something new, you do it on a small scale to start with. Validate that everything works the way you think it\u2019s going to work and scale things up with your confidence.\u201d<\/p>\n Get the day\u2019s top crypto news and insights delivered to your email every evening.\u00a0Subscribe to Blockworks\u2019 free newsletter<\/a>\u00a0now.<\/strong><\/p>\n Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can\u2019t-miss tweets and more from\u00a0Blockworks Research\u2019s Daily Debrief<\/a>.<\/strong><\/p>\n Can\u2019t wait? Get our news the fastest way possible.\u00a0Join us on Telegram<\/a>\u00a0and follow us on\u00a0Google News<\/a>.<\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Using decentralized finance to take on USD-denominated debt without paying any interest seems like a pie-in-the-sky concept, but it appears that at least one such decentralized lending mechanism already exists.\u00a0 Recently activated on the THORChain protocol, the tool even reportedly averts liquidations and expirations \u2014 a novelty in crypto\u2019s high-risk, high-reward DeFi sector. The service […]<\/p>\n","protected":false},"author":2,"featured_media":145051,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[230,225,221,227,226,228,229,60,223,224,222],"class_list":["post-145050","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptocurrency","tag-brave","tag-coinbase","tag-crypto","tag-decentralised","tag-decentralized","tag-decentralized-exchange","tag-erc-20","tag-featured","tag-meme-coin","tag-robinhood","tag-solana"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/145050","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=145050"}],"version-history":[{"count":2,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/145050\/revisions"}],"predecessor-version":[{"id":145796,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/145050\/revisions\/145796"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/145051"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=145050"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=145050"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=145050"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Starting small<\/h2>\n
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