All You Need To Know About The DeFi Leasing Platform Decentralized finance (DeFi) allows individuals to use a variety of financial products and markets, such as crypto lending, where they lock their assets as collateral for a loan.
However, DeFi lending apps are not all that perfect despite all the services they have to offer as they suffer inefficiencies. This is where Nolus comes in; a DeFi financial suite built on Cosmos that aims to address these imperfections with a new concept called the DeFi Lease. Keep reading to find out how it works.
What is the Nolus DeFi Lease?
The Nolus DeFi Lease takes the financial finance leasing model to the world of decentralized finance. It gives users more exposure to tokens as well as addressing the strict over-collateralization requirements of the crypto space by allowing them to deposit crypto into the Nolus Protocol and receive up to 150% financing on their investment.
In traditional leasing however, users can only obtain an asset by paying a portion of the asset’s total value upfront. They can then use the assets throughout the leasing period and gain full ownership by completing the lease agreement.
What issues does Nolus aim to solve?
In traditional crypto lending, loans require more collateral than the borrowed amount. While this method reduces the risk of liquidation, it also causes inefficiencies. The problem with over-collateralized loans is that they lock up assets that could otherwise be used to reduce counterparty risk. Nolus addresses this issue by providing funding up to 150% of the initial investment, reducing the required collateralization by
a factor of 3.
Also, traditional DeFi liquidation methods put users at risk as their entire holdings could be liquidated at a reduced value. Nolus introduces partial liquidations, where only a part of the collateral is liquidated when the asset declines by 30%, giving borrowers more time to recover their position. According to Nolus, their liquidation rates for its DeFi leasing offering are 40% lower than the industry average.
In order to address the issue of fluctuating interest rates seen in traditional DeFi platforms, Nolus locks interest rates when creating the DeFi lease smart contract.
It also takes a step further and secures the leased assets and the initial deposit together during the contract term, while also allowing users to utilize the leveraged assets for generating yields through strategies approved by Nolus, and at last, they gain complete ownership and control over the secured assets once the loan is repaid in full.
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