ADALend: Protocol Efficiency ON CARDANO In Handling Interest Rates
December 14 2021 - 11:17PM
NEWSBTC
In order to diversify their portfolios, crypto traders turn to
fixed-income instruments like bonds and stocks. A substantial
economic force to be reckoned with, the cryptocurrency market is a
legitimate source of debt securities that are no less reputable
than their equivalents. With interest rate derivative products, the
creditors in the cryptocurrency market, mostly comprised of lenders
and borrowers, hope to stabilize their revenue and reduce their
risk. There are two types of interest rate derivatives in the
crypto market: one that lets you extend the length of your loan and
one that enables you to raise the interest rate. In the traditional
financial markets, there is a big difference between the interest
rates offered to borrowers, and the interest rates offered to
lenders. The same is true in the crypto-financial market. ADALend’s
Utilization Ratio The interest rates for both borrowers and lenders
will fluctuate with the changes in the utilization ratio of the
loans in the specific pool. The interest rate is dependent on the
total amount of money available in the liquidity pool, which is
denominated in the platform’s LP token. If more people are looking
to borrow than funds in the liquidity pool, the interest rate
increases; if more people are trying to lend than borrowers, the
interest rate decreases. The utilization ratio is a ratio between
the total amount of tokens in circulation and the amount of tokens
actually used by the platform. The ADALend platform is designed to
maintain the utilization ratio at a low level for non-stable coins.
In doing so, the platform will maintain a higher amount of tokens
in circulation at the same time. The higher amount of token in
circulation will allow for the platform to support liquidity
mining, in which the token holder is rewarded for holding the
token. The token holder will be rewarded for holding the token by
receiving loan interest from the borrower. When the borrower pays
off the loan, the lender will pay back the interest to the token
holder who has been holding the token. This is what makes the token
a valued asset. ADALend Protocol for Efficient Idle Asset
Management The protocol will reduce idle assets on the platform by
shifting a portion of them to stable swap platforms with no
temporary loss within the acceptable range. The core program
architecture of the ADALend project includes making use of idle
assets. Rather than storing your assets in cold storage, they can
be leased out or borrowed to support the ADALend Lending protocol.
This will not only aid in the recovery of the asset’s idleness, but
it will also result in a profit for the asset’s owner as a result
of its sale. It will, in turn, be beneficial to everyone in the
blockchain market sector, which makes use of the Cardano ecosystem
as a result of this, which assures an equitable asset allocation
based on the terms of the loan arrangement between the borrower and
lender.
Cardano (COIN:ADAUSD)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cardano (COIN:ADAUSD)
Historical Stock Chart
From Apr 2023 to Apr 2024