Thread by @Subli_Defi

1/19 Lending protocol are DEFI primitive Dapps

However, capital efficiency is not achieved due to liquidity being idle and unused

So what are the new solutions? Undercollateralized Loans

@sentimentxyz is project recently launched on #Arbitrum who solved this!

A thread 👇🧵

2/19 Undercollateralized Loans are the new DEFI products which aim to achieve capital efficiency.

Few Lending protocols are:
@maplefinance
@goldfinch_fi
@dammfinance
@sentimentxyz

3/19 While overcollateralized lending is the status quo in #DeFi, loans in traditional finance are often undercollateralized

Overcol. Loan are capital inefficient due to large spread btw Lend & Borrow Yield, except rare occasion like #themerge for $ETH:

https://twitter.com/DefiMoon/status/1559393890939150336?s=20&t=Fa69ifalSGRoFqSBGc99jw

4/19 You can easily see that on this chart from @compoundfinance where you see the diff. between borrow & lend rates Vs Utilization rate:

compound.finance/markets/ETH

5/19 The risk of undercollateralized loan is in case of User default, loan is not paid back, resulting in a loss on the protocol. So what are the solutions?

1-Assess the Creditworthiness of borrowers
2-On-Chain hypothecation

6/19 @sentimentxyz is a permissionless undercollateralised onchain credit protocol that allows users to lend & borrow assets with increased capital efficiency and deploy them across DeFi

Whitelisted strategy at launch were as shown below, and more will be added in the future:

7/19 @sentimentxyz has been launched on #Arbitrum on 21st October ’22 & succeeded in raising 2.4m$ led by @archetypevc , with some big guys, such as Angel Investor as @dcfgod

https://twitter.com/sentimentxyz/status/1568296497426612226?s=20&t=M0r1oUc-k0_S5erS7iGXsw

So what can one do on this protocol?

8/19 ACCOUNT:

One user can create one or multiple isolated accounts which will act as isolated account on the borrow position, so in case one account is meant to be liquidated, this will not impact the other ones.

9/19 LENDER:

User can provide liquidity to the protocol and receive yield. Yield is based on utilization rate of course, but since there should be benefits for borrowers to get up to 5x leverage, utilization rate raise so as the supply APR.

10/19 BORROWER:

User can deposit stable or $ETH / $BTC as collateral (for the moment), and can borrow stable or $ETH up to 5x leverage

Here is an example of a loan using @AaveAave or @sentimentxyz -> 5.31x More Efficient!! 😍

Fee: 0.5% of the borrow amount

11/19 The best part here, is that your collateral can be farmed in the whitelisted contracts, where compared to AAVE, COMPOUND, collateral just stays in the Dapp in an inefficient way

So you borrow up to x5 and then can invest then up to x6 🫡

12/19 INVEST:

Your loan is not your custody, and can only be used through @sentimentxyz whitelisted contracts & safeguard is made through what is called CONTROLLER.

As of today you can swap, lend, deposit in LP through these protocols:

13/19 But things are now getting more interesting as the team just announced the integration of @Balancer where we will be able to deposit in the following Pool:

📍wstETH/ WETH
🎯 WBTC/WETH/USDC
🚀 wstETH/ USDC

https://twitter.com/sentimentxyz/status/1589754604568207360?s=20&t=3vYihGPZPpDjlwBU-AO7Pg

14/19 OTHER TYPICAL USES CASES:

Short a Major (ETH, BTC, etc.) against a stablecoin

Short an asset against another asset (Spread Trade) -> Could be useful to hedge a LP position also

Leverage LP Token

15/19 AUDIT:

Smart contracts have audited by @sherlockdefi , which in return insure Lenders up to 10m$ TVL

@dcfgod said it's almost a free investment on the last @MarketCapping live, Indeed, i agree!

sherlock.xyz

16/19 TOKENOMICS:

@sentimentxyz has no token yet as trying to find the product market fit, but in the last live with @YuntCapital , team said that early users that help to bootstrapp the protocol will be rewarded.

https://twitter.com/sentimentxyz/status/1572647113686908928?s=20&t=RjcPU8wWQDgy47pQqOze_g

17/19 Don't hesitate to join their discord discord.gg/sentimentxyz if you have some questions.

For info, i'm not part in anyway with the team, but as a DEFI user i just found this project very interesting, and will certainly leverage some positions in it!

Non Financial Advice

18/19 Please make sure you follow these guys for meaningful information about new #DeFi Gems:

@DefiIgnas
@dcfgod
@corleonescrypto
@HenryEbe2
@0x_d24

& the 2 founders:
@0xSnarks
@ruvaag

19/19 If you liked this thread about @sentimentxyz please feel free to rewteet the post below:

https://twitter.com/Subli_Defi/status/1590278370004455424?s=20&t=rygA2DAtInD4w6p828BmtA