Bonded Finance is a project set to build the next pool of financial tools that can be used to aggregate the collective liquidity of many underutilized altcoins.
The Decentralized Finance (DeFi) space undoubtedly holds enormous potential. The industry has witnessed massive growth in the year with the proliferation of digital assets set out to maximize profits as much as possible in yield farming schemes and holding DeFi tokens.
While many have been able to achieve this goal, so many others have struggled with volatility as well. And while in reality, the sector keeps putting a great load of assets into use. Yet most of these assets are even not being maximized. Consequently, this has created a huge amount of untapped liquidity and resource in altcoins.
This is the opportunity that the founders of Bonded Finance had spotted in the sector and have tried to find a solution for. By reading this guide, we would understand how Bonded Finance plans to provide a way to put altcoins to work.
A DeFi project that is designed to aggregate and earn for many would have a team of developers and experts who are at the top of their games.
And this is true for Bonded Finance as the team is led by Peter Aiken, who is a senior partner and has over 20 years of experience to show for it. He has served, at different times, as Chairman or Board member of various leading organizations globally.
Paul Mak is a serial investor and a top executive with over 17 years of experience in investment and management roles in the Asian and Pacific markets.
Another member of the team is Lorena Valencia, whose vision and foresight has improved the institutions she has worked in. She is well known for improving operational efficiency of various firms, as well.
Others on the team are Sameep Singhania who has over 3 years experience in the DeFi industry as an Ethereum and smart contract developer.
What is Bonded Finance?
Bonded Finance is very much unlike the many projects littering the DeFi sector. While the vast majority of DeFi networks are focused on how to make assets work, there has been little to no focus on how to improve on untapped liquidity and resources in altcoins.
Bonded Finance is set to solve that issue as it is actively building a next pool of financial tools that can be used to aggregate the collective liquidity of various underutilized cryptocurrencies (altcoins).
Like its name implies, Bonded Finance is looking at how a properly managed group of volatile crypto assets can come together to create a stable ecosystem.
It also goes on to see how “bonding” lenders and borrowers can create a room to share their resources, which in the end, would result in lasting, sustainable growth and creation of value. This is going to be done in such a way that regardless of the various agendas and opposite goals of its members, the ecosystem will still thrive.
To put this in context, there is over $50 billion dormant, at the same time, the value of under-utilized liquidity in altcoin stands at over $30 billion. These figures, however, do not tell the full picture because it is taken from a large sample of verifiable projects that have price and volume history.
And with lenders only supporting a limited number of assets in the industry, there is a greater number of altcoins that have tremendous opportunities but also come with an equal level of risks attached.
What Bonded Finance seeks to do in the market is identify such pools with enough capital and liquidity among the untapped altcoins, harvest them using the smart tools that were created for that purpose, and generate profits. At the same time, these tools can greatly reduce exposure while also ensuring the realization of values in the market.
Bonded Accelerated Crypto Loan (ACL)
This is the first of the four products Bonded Finance have in line for their investors.
ACL is a simple crypto loan accelerator that offers a unique set of features that are almost totally new in the DeFi space. This accelerator enables a dynamic borrowing and lending market where interest rates differ by available assets. By cutting out the need for a middle man, the accelerator enables borrowers and lenders to have a platform where they can interact.
The accelerator also allows the interest rate to differ according to assets that may be available on the platform. Lenders can connect their Metamask account on the platform easily while also depositing their assets into a liquidity pool directly.
The platform, like every other DeFi platform, leverages on Ethereum. But it is distinct in the sense that it has an extra layer of protection in Chainlink. Bonded Finance uses the Chainlink oracle to siphon crypto prices from at least ten different crypto exchanges in order to determine the borrowing capacity and the collateral requirements.
While many would wonder how the platform seeks to keep borrowers and lenders motivated on the platform, the ACL aggregator would do so by aggregating every supply of a lender’s asset into a liquidity pool. The pool then creates a fungible asset that can be borrowed at any time. That way, lenders and borrowers become motivated to keep participating on the platform and at the same time improve liquidity. This is expected to result in a win-win situation for DeFi in the long run.
The ACL Protocol should not be expected to immediately provide support for all tokens. However, investors can still be sure of having a wider range of access to assets that would be greater in numbers to the current available platforms.
Governance of Bonded Finance’s ACL
Currently, the governance of ACL would be centralized. The centralized authority would be saddled with choosing the interest rate for the different assets, as well as the decisions on behalf of the community of users.
However, as ACL evolves, the control given to the cental authority would be taken over by the community and stakeholders. But pending when that happens, the central administrators would have the following level of control:
- They can list new bTokens.
- They can update the formula that would determine the interest rate and other important calculations.
- They can update the base interest rate and also step the interest rate for each market.
- They can update the oracles address.
While the project has the same similarity with other DeFi projects in trying to ensure that investors maximize profits, Bonded Finance is different from the large numbers of DeFi projects that have crowded the industry lately.
The project looks to enable investors to be able to put funds in a wide range of altcoins that many may be reluctant to invest in due to their volatility. But Bonded’s use of ACL helps to greatly reduce the risks that might come with investing in such assets.
In addition, the use of ACL also creates a platform where lenders and borrowers can interact without the need for a middleman.