Developers are joining forces for improved DeFi liquidity on the Layer 2 base network
Developers team up to launch DeFi liquidity markets on Base, automating the connection between liquidity pools and borrowing.
Several decentralized finance (DeFi) developers have come together to introduce non-custodial liquidity markets on the Layer 2 Base network. Their goal is to use trustworthy smart contracts that can automatically link liquidity pools to specific lending strategies.
The minds behind this project include developers from Seashell, RNG Labs and Loreum Labs. They have also worked with employees and consultants from projects such as Ampleforth and Uniswap. Together they developed the Seamless Protocol, an offshoot of Aave v3. This unique protocol enables smart contracts with specified borrowing strategies to perform on-chain borrowing without requiring full collateral.
A spokesperson for Seamless drew a parallel to traditional finance and compared credit strategies to specialty loans, such as for houses, cars or education. The lender is aware of the purpose of the liquidity and the borrower cannot use it for other purposes.
While the idea of undercollateralized borrowing is not new in the cryptocurrency space, current practice often mixes off-chain and on-chain actions. For example, if someone wants a loan from Maple Finance, they would first discuss the details with Maple representatives. Only after this off-chain discussion would a loan be officially granted on-chain.
Seamless’s perspective focuses on this gap. They argue that many borrowers are completely clear about their liquidity needs. Therefore, integrated borrowing strategies are designed to bring these processes together. Because these strategies are embedded in on-chain smart contracts, those providing the liquidity can see exactly where their funds are going.
The Seamless Protocol is not just limited to specific purposes but also includes general purpose loans. However, these follow typical DeFi lending standards and require over-collateralization.
Seamless believes their approach fits the essence of DeFi better than on-chain reputation metrics or proof of identity like WorldCoin’s identity verification system. According to a Seamless employee, the optimal conditions for undercollateralized borrowing can be achieved through a system that works from one smart contract to another, emphasizing the fundamental principles of cryptocurrency and DeFi, which prioritize code trustworthiness over human reliability.
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