Lendefi Finance Offers Trustless Undercollaterized Loans to Everyone

Project Reviews / 06.04.2021

Lendefi Finance operates as a next-gen DeFi lending protocol. The network offers lenders and borrowers some out-of-the-box features, such as the ability to issue and take out undercollateralized loans in a trustless manner. To accomplish this task, Lendefi FInance introduces a unique security mechanism that leverages liquidity providers such as Uniswap and PancakeSwap. Notably, the network is the first undercollateralized lending platform to launch on the Binance Smart Chain.

Collateralized vs. Undercollaterized Loans

Undercollaterized loans are seen as a major development in the DeFi sector. Unlike a collateralized loan, these financial tools allow borrowers to secure funding without the need to provide security in the form of fully backed collateral. Instead, lending platforms delegate credit to a borrower, which allows them to access funds without all the red tape associated with these actions.

What Problems Does Lendefi.io Attempt to Fix?

Lendefi Finance attempts to reduce or remove some critical problems faced by both lenders and borrowers. For one, the reduction of collateral requirements opens up lending options to many international borrowers. As part of this strategy, Lendefi has developed a complete system that eliminates the middleman and provides a more streamlined lending experience for all parties. 

Risks

Lendefi’s structure enables the firm to offer lenders high rewards with less risk when compared to other peer-to-peer lending options. The platform leverages liquidity pools to ensure that lenders receive their repayments on time. These loans are secured by the liquidity provided on DeFi ecosystems such as PancakeSwap.

Centralization

Another issue that Lendefi tackles head-on is congestion in the DeFi market. Currently, Ethereum is the top DeFi blockchain. However, recent congestion issues have caused the network to become more expensive to utilize. BSC is considered Ethereum’s primary competitor. It offers more scalability, programmability, and lower fees than Ethereum. Consequently, it has seen considerable growth over the last few months, with Lendefi Finance platforms leading these pioneering efforts. 

Selection

Lendefi supports a variety of popular assets at this time. Borrowers enjoy more flexibility than the competition because the network operates on both Ethereum and the BSC. This dual chain infrastructure provides more options to users than single-chain alternatives.

Deflationary

Lendefi protects its investors through the integration of a deflationary protocol. Specifically, the difference between the interest rate the borrower pays and the lender receives is used in a buyback and burn campaign. Burning mechanisms are more popular than ever in the DeFi sector because they provide developers with more control over their token’s value, increasing the demand by removing coins from circulation.

Security

Lendefi offers users enterprise-grade security features. The platform has never been successfully hacked since its launch. Additionally, multiple third-party audits have been used to verify the security of the network. Specifically, Slowmist, Beosin, and Johnwick have all evaluated the platform’s coding.

How Does Lendefi.io Work

In the Lendefi ecosystem, the lender receives variable interest rates based on the amount they lend out, their asset, and the time period lent. Lenders never have to worry about delinquent loans because their investments remain secured by large DeFi liquidity pools.

Fees

Lendefi operates a unique fee structure. Specifically, the difference between the interest rate the borrower pays and the lender receives gets used to purchase LDFI tokens from the market. These tokens are purchased explicitly for burning and the issuance of rewards. As part of its strategy, Lendefi only initiates its liquidation protocols once an asset loses 40% in value.  

BUSD

All loans are funded and borrowed in BUSD. The token operates as the network stablecoin pegged to the USD. A stablecoin for lending and repayment is smart because it simplifies the accounting for users and eliminates losses due to conversion rates.

LDFI

LDFI operates as the native token for the Lendefi Finance ecosystem. This unique financial instrument entered the market in January 2021. The entrance of LDFI into the network also symbolized the start of the BSC migration. The token also acts as the main governance token for the network. You can acquire LDFI on both Uniswap and PancakeSwap. 

Staking

To provide users with more earning opportunities, Lendefi Finance announced plans to offer staking options to users. Staking features are considered standard for most DeFi networks. They provide users an easy way to secure a passive income that is less risky than trading assets for new users.

Yield Farming

Another exciting feature that’s in the works is the opening of yield farming pools. Yield farming is very similar to staking in that you lock your crypto into a smart contract in exchange for rewards. However, yield farming protocols don’t have pre-set lockup periods. 

Governance

Lendefi Finance integrates a community governance mechanism in the form of a Decentralized Autonomous Organization (DAO). Any LDFI address holding more than 1% of the tokens or voting rights delegated to that address by over 1% of total supply can create proposals that the community will vote on. These proposals can cover a wide array of upgrades, including the changes to the interest rate model, including supported assets, reward distribution, and other terms and conditions related to the network.

History of Lendefi Finance

Lendefi Finance entered the market in December 2020. At that time, it was an Ethereum-based network. However, the developers behind the project decided to migrate the operations on BSC chain to avoid future fee concerns. Today, Lendefi Finance is recognized as the first undercollateralized lending platform to go live on the BSC.

Lendefi Finance – More Security and Profits for Lenders

Lendefi’s unique approach to the P2P lending sector is sure to spur interest in the network. Undercollaterized lending protocols have been around for a long time; however, it wasn’t until the DeFi market exploded in popularity that developers and the public began to find new and exciting ways to make these financial instruments more accessible to the public. For these reasons, you can expect to hear more from Lendefi Finance in the future.

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David Hamilton aka DavidtheWriter is a long time Bitcoinist and cryptocurrency journalist. Currently, he has over a thousand articles published on blockchain technology. His expertise and experience makes him one of the most reputable writers in the sector.