In traditional finance, leaner banking models without physical locations allowed online banks to cut costs and pass the benefits onto the customer. Banking services built on decentralized networks like Ethereum can offer even more advantages by further reducing operational costs such as securing assets which would traditionally be held in custody. Non-custodial protocols like DeFiner allow users to access savings and loans anytime, anywhere with an internet connection putting you in control of your money.
DeFiner is a non-custodial protocol which aims to be a better banking experience than traditional banks by making full use of the disruptive innovations happening in DeFi. Since its founding in 2018, DeFiner has gone on to win the Detroit Fintech Challenge in August 2019 and participated in the Techstars Accelerator and Microsoft Startup Program. Partnerships with both names from traditional tech firms like Microsoft and Consensus Labs as well as names from DeFi like Wyre and Kyber have helped DeFiner move closer towards its goal. DeFiner envisions a complete range of DeFi banking services starting with its first two products: peer-to-peer lending and DeFi savings.
DeFiner’s Taurus savings takes advantage of existing money legos
DeFiner launched Taurus Savings Accounts in late November 2020. Taurus Savings Accounts work similar to DeFi money markets you’re likely familiar with. You can deposit assets to earn interest or borrow against your collateral. While loans on the DeFiner protocol are overcollateralized, DeFiner takes advantage of existing DeFi protocols to offer its users borrowing and lending interest rates typically better than the industry average. You see DeFiner takes a portion of the collateral held in its reserves and lends it out on popular money markets like Compound or Maker to earn interest. In other words, DeFiner increases capital utilization to up to more than 85% to reduce the spread between borrowing and lending rates.
It’s worth noting that while this does indeed lower the spread, it comes at the cost of added composability and economic risks. Imagine a scenario where the value of a collateral asset drops quickly or a bug is found and exploited and Compound is unable to cover existing debts. This in turn may mean DeFiner could also be left with insufficient collateral unable to cover existing debts.
When things don’t go as planned, DeFiner allows borrowers to pay back their loans with their collateral. Triggering a self-liquidation sells your desired collateral at a 2% discount in order to cover your debt and avoid a forced liquidation, which bears a 5% collateral discount. Both discounted rates are designed to attract liquidators to participate in collateral auctions and ensure debts can reliably be covered in a timely manner.
DeFiner protocol uses its native token FIN to reward its most active users as well as incentivize users to help meet demand in highly sought after lending markets like USDC and DAI. DeFiner protocol releases new FIN tokens via its Proof of Premium (POP) distribution mechanism. Proof of Premium verifies the premium the prover (lenders and borrowers) generated in a specified time interval. To sum up POP, the more capital committed by a user for longer time periods and higher interest rates results in more FIN tokens being rewarded through the POP mining mechanism. FIN token holders can vote on the follow four categories: lending platform changes (i.e. loan to collateral value ratios, transaction fees, etc.), determining how platform fees are distributed, determining the distribution of FIN token rewards, and electing the board of directors for the DeFiner Organization, a non-profit entity which maintains and promotes the growth of the DeFiner lending platform and community. Currently, 100% of transaction fees and 10% of all interest generated by loans on the DeFiner protocol are distributed to FIN token holders. Learn more about FIN token and Proof of Premium here.
Decentralized finance has been a series of innovations each one building on the next. That’s why it’s nice to see DeFiner exploring ways to utilize secondary money markets to improve its own money market for the benefit of its users. DeFiner plans to release a mobile app in the future. With the ever increasing popularity of mobile banking, this feels like a natural progression of DeFiner’s mission to reduce friction for users. Follow DeFiner on Twitter to keep up with the latest updates. And if you’re curious how DeFiner’s design impacts interest rates, we urge you to check out Taurus and compare it to other popular lending platforms. Thanks for reading.
Disclosure: This post is part of our paid promotional DeFi Pulse Drop series; We’ve partnered with DeFiner to help educate and inform the community about the DeFiner protocol. As always, we’re committed to providing the entire community with quality, objective information, and any opinions we express are our own.