The advent of automated market makers (AMM) has quickly revolutionized the decentralized finance sector. Several of the largest DEXs, including Uniswap, Curve, SushiSwap, and Balancer, have contributed significantly to DeFi liquidity on Ethereum and other blockchains. The democratization of liquidity provision was made possible by these systems, although capital efficiency mostly remained an issue. To solve this challenge, Unfound Finance has come onto the scene with a new offering. But what founded Unfound Finance?
A key DeFi prospect identified by Unbound is the ability to leverage Liquidity Provider (LP) tokens. By securing their unused LP tokens, users were able to borrow interest-free cryptocurrency loans through the protocol’s lending structure. Unbound Finance eliminates the need for a liquidation engine by supporting LP tokens from stablecoin asset pairs and relying on SAFU reserves to protect user-posted collateral during periods of high volatility.
Unbound Finance is a decentralized, cross-chain lending platform that allows DeFi users to borrow loans backed by “synthetic assets” with excessive collateral by pledging idle interest-bearing tokens (ib tokens) at a 0% interest rate. The tokens then continue to incur transaction fees while being collateralized by providing liquidity to the underlying pool. The borrowed money can be used to lend, borrow, trade or even buy more LP tokens to increase the return on the same investment.
The rewards generated from automated yield farming of deposited assets can increase users’ APY. The platform creates minted tokens of the AND stablecoin and provides liquidity for the AMM LP tokens. Once the borrowed AND token is returned, the protocol releases the collateralized assets. Unbound Finance is a project enabling Uniswap v3 position collateralisation, with the primary goal of developing a composable DeFi solution.
Interest-free borrowing
Unbound Finance provides AND liquidity to users without charging interest on lent liquidity.
liquidation free of charge
Unbound Finance does not have a liquidation engine. Hence, users are not inclined to liquidate their collateral.
Eternal Loan
With untied financing, there is no limit to how long loans can last. By offsetting the outstanding loan, users can release the underlying collateral at any time.
stablecoin AND
The AND of the Unbound protocol is its first main token. As the protocol’s native token, it is a decentralized, cross-chain stablecoin built specifically for the AMM market.
Factory Smart Contracts
Unbound supports EVM based AMMs like Uniswap, Balancer, Mooniswap, DFYN, SushiSwap etc. It leverages Liquidity Lock contracts which are designed to be permissionless. According to the white paper, the protocol will soon support non-EVM-based AMMs.
Collateralizing concentrated liquidity positions
Unbound supports using concentrated liquidity positions as collateral for lending synthetic crypto assets like the AND stablecoin.
Minting cross-chain synthetic assets
Oracles and native bridges are used by Unbound Finance to perform cross-chain transfers of AND and other synthetic assets.
Assured price oracles
Unbound reduces dependency on a single price oracle by using Uniswap’s TWAP and Chainlink to get a highly secure price feed and protect the platform from Flash attacks.
Lend
By depositing their LP tokens as collateral, Unbound users can borrow interest-free cryptocurrency loans. The protocol’s native stablecoin, AND, is used to issue credit. Unified Digital Token (UND) stands for a decentralized stablecoin pegged to the US Dollar.
Unbound vaults
By using LP tokens from pairings of volatile asset classes and stablecoin LP tokens as collateral, the latest version of Unbound allows users to borrow AND. The protocol also supports the use of concentrated liquidity positions as collateral. By placing LP tokens or ERC-20 tokenization of concentrated liquidity holdings in specific pools in one or more vaults on the Unbound platform, users can AND borrow. A user may only check out as much AND as his checkout capacity allows. The underlying currency reserves are protected from collateral realization at all times when a user borrows a loan of a value less than, equal to, or greater than the borrowing capacity.
rental fee
Unbound does not accrue interest on the loan granted to the user. Nonetheless, the protocol charges a one-time borrowing fee on the sum of the AND charged against the secured assets. Each time AND is borrowed, the fee is collected and added to the borrower’s debt. The user must pay the total amount borrowed in AND along with the borrowing fee to release the underlying liquidity supporting the loan.
The borrowing fee will continue to fluctuate to help maintain UND’s dollar peg and serve to stabilize the Unbound ecosystem. This fee ranges from a minimum of 0.5% to a maximum of 5%. The loan fee is determined by a formula that takes into account the base rate, the value of the borrowed debt in AND, and the cost of the loan. The formula is:
Rental Fee = (Base Rate + 0.5%) * ANDDebt.
unlock
Loans on Unbound Finance are perpetual, so users’ AND loans do not have to be repaid by a specific date. Users can remove their secured assets at any time without restriction by paying off all or part of their outstanding debt and the cost of borrowing.
The Collateral Ratio (CR), recalculated by the Unbound Smart Contract using price data from the price oracles in each case, is used to determine how much collateral to release. The borrower has thus returned the AND, which is withdrawn from circulation and burned as part of the unlocking process.
yield farming
Unbound automatically puts the collateralized assets into safe and profitable yield farming pools to maximize the reward from users’ investments. Incentives generated in this way are distributed proportionately to each borrower.
The tokens will be removed from the farming contract once the user unlocks liquidity from the platform to withdraw the collateralized assets, and the protocol’s smart contracts will automatically claim the profits accrued on them and transfer them to the user’s wallet.
Earn
By adding liquidity to the AND pools across multiple DEXs via the unbound protocol, AND holders can enjoy additional benefits. Users can collateralize their LP tokens on Unbound to borrow more AND, or put the tokens they receive afterwards into the supported farming pools to increase their APY. A composite yield is obtained for the users by repeating the procedure several times.
liquidation
Unbound uses over-collateralized lending strategy to protect the protocol from excessive market volatility. This means that the value of the security for the debt should always be greater than the value of the borrowed AND. Loan positions can be liquidated when the collateral ratio of the user’s debt position falls below the Minimum Collateral Collateral Ratio (MCR) of the linked unbound vault. This could occur if the value of the underlying collateral used to secure the loan falls.
repayment
Unbound uses redemption as a price stability mechanism to preserve the AND token’s value against the US Dollar, a fiat currency to which it is linked. The protocol allows users to take advantage of the arbitrage opportunities that arise from the discrepancy between the market price and the peg value of AND.
In situations where the price of AND in USD falls below parity, consumers can buy AND on the open market at a lower price and exchange it for the underlying reserve value at face value. The procedure causes the returned AND to be burned, reducing supply and causing the token’s price to approach its target result ($1).
redemption fee
Trading AND at face value allows the redeemer to recover a certain amount of collateral and the protocol charges a redemption fee on that amount. The formula used to calculate the redemption fee is redemption fee = (base rate + 0.5%)* collateral withdrawn
A dual token ecosystem exists within the unbound protocol $UNB and $UND. UNB is used as a governance token and AND as a stablecoin.
AND – The decentralized stablecoin
The Unbound platform’s native stablecoin, UND, will be distributed to users as a loan backed by their collateral. It is a cross-chain, decentralized ERC-20 stablecoin pegged to the US dollar. User-supplied collateral is used to secure AND. The amount of AND the user borrows depends on the current value of the reserve assets they have locked and the MCR of the associated unbound vault. Before the underlying collateral is returned to the user, the borrowed AND is burned once included in the unlock contract.
UNB – The unbound governance token
The UNB token serves as the protocol’s governance token. Token holders have voting rights, and the token itself facilitates participation in decision-making. Token holders can vote for or against proposals for implementations and improvements that would improve the effectiveness of the protocol and serve the community.
The following are just some of the roles that can be expected of UNB holders:
- Cast your vote for the asset pairs you want to use as collateral,
- Calculate the borrowing rate and minimum collateralisation ratio (MCR) for the whitelisted asset pairs.
- Change the variables that affect the borrowing rate and repayment costs,
- change the MCR for the existing collateral asset classes,
- Change the interest rate for each category of collateral value,
- Find out how much money each vault can loan worldwide.
In terms of distribution and allocation, out of the total supply of 10 billion UNB tokens, 30% goes to the reserve, 25% goes to the team, 30% is for sale and the last 15% goes to the foundation.
Unbound Finance has a truckload of investors and partners. Some of the partners are Kucoin, Bitbns, Pantera Capital, Fintech Collective, TRGC, LD Capital and Gate.io. Their investors include the co-founder of Polygon Sandeep nail whaleCo-founder of Gnosis Stephen GeorgeFounder of wikiHow Jack HerrickCo-founder of Harmony Sahel Dewan, and a bunch of others.
Unbound Finance is a cutting-edge non-custodial lending platform motivated to open more higher-yield alternatives to increase the overall capital efficiency of the DeFi ecosystem. The aim of Unbound is to allow for the easy transfer of this liquidity from one chain to another without actually eliminating it, by unleashing the liquidity present in DeFi DEXs through synthetic assets such as the AND stablecoin.
Also read;
https://cryptotvplus.com/2023/02/defi-will-be-safer-if-developers-do-these/
https://cryptotvplus.com/2023/02/how-nfts-revolutionizing-the-travel-industry/
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