Hashstack’s goal is to discredit and increase the popularity of decentralized lending and borrowing. Open Protocol provides access to under-collateralized loans at a 1:13 ratio. This is an important change in the DeFi sector, since current collateralization rates are too high.
Adjusting loan collateralization in deFi
A traditional loan can only be obtained if the collateral is less than half of what was borrowed. Decentralized finance is different. Instead, users often put up 150% – or more – of the amount they want to borrow. If one has more liquidity than is needed to borrow, it doesn’t make much sense to take out a loan.
The high interest rates on loan collateralization are unfortunately a common feature of decentralized finance. The use of volatile crypto assets warrants a “buffer” of sorts. Markets are susceptible to sudden changes and can often become bearish just when they need it. Protocols must be very careful as this can devalue the collateral and loan ratio. Open Protocol will make things better, thankfully.
DeFi, the Hashstack-designed protocol that will allow loan collateralization, opens up new opportunities. The new DeFi protocol, designed by the Hashstack team, will allow users to collateralize up to one third of their loan amount. This allows for undercollateralized loans that can be accessed worldwide. After obtaining a loan, users have the option to withdraw 70% of their collateral and keep the rest as working capital.
Hashstack is also a mechanism to ensure the infinite scaling of storage and smart contract logic. This will allow for the use of trading capital that is locked in the Open Protocol. The mechanism will be submitted as an Ethereum Improvement Proposal – EIP-9000 – and foster secure and upgradeable smart contract deployment. DeFi welcomes the fact that Hashstack allows for unlimited integration of dApps via Open Protocol.
Open Protocol Public Testnet
Hashstack has made the solution available for public testing. Open Protocol allows users to experiment and offer feedback in order to improve the protocol’s appeal. Team members have worked tirelessly to improve the user interface. It combines base interest rates with an algorithmic determinaant that is kept constant for as long as seven days.
Vinay Kumar (Hashstack Finance founder) comments
“After going live, our public testnet attracted more than US$5million in total value locked TVL. The public testnet release marks a significant accomplishment in Hashstack’s roadmap as we prepare to launch the Open Protocol mainnet later in the second quarter of 2022.”
Open Protocol’s new loan collateralization rate suggests a bright future in decentralized finance. The industry is still plagued by inefficiencies and needs to be fixed. Open Protocol addresses some those issues. It includes maximizing asset utilization, compartmentalizing the APY/APR, and improving effective asset utilization.
It will be fascinating to see how Dapps connect with Open Protocol or Hashstack. PancakeSwap is confirmed and can be used to increase loan utilization. Borrowers are able to swap their borrowed assets with any crypto asset using the same interface. Open Protocol is currently focused on BTC (SUDT), USDC, BNB, HASH and USDC. More tokens will be added as the project grows.