There is always competition between lending protocols to offer the right interest rate and users are looking for the best interest rate to get a loan. Merchants are looking for low interest loans that allow them to achieve a profit maximization strategy. The problem is that many platforms use a floating percentage system that can turn a profitable trader’s plan into a losing one. To solve this problem, Yield introduced a system protocol for creating and receiving fixed interest loans. In this article we will review this protocol, we hope it will be useful for you.
What is yield protocol?
Yield Protocol is a fixed interest lending and borrowing service on the Ethereum platform. The yield protocol uses tokens called Fixed Yield Tokens to achieve its goal of fixed interest. These types of assets are called fyToken for short and have the ERC20 standard. Please note that these tokens are not protocol tokens and are only used to lend and receive loans.
Why is a release protocol necessary?
Let’s say, based on your analysis and research, you expect the price of Ethereum to increase by 10% in a certain time frame in the future (say, one year). To be able to take advantage of the potential position and also get more income or profit, you join the stablecoin lending protocol, Dewalk. The interest on the loan is 3%. The difference between the loan interest earned and the potential increase in the price of the property in question will be your profit (10% – 3% = 7%).
So far so good, but if interest rates rise for some reason, such as reduced demand for credit, the 7% profit from buying Ether will no longer be realized. The higher the interest rate and the closer to the expected rate (10%), the lower our profit will be. This platform may raise interest rates to the point where consumers would lose out by taking out a loan under the scenario described.
On the other hand, this also applies to those who lend money. Let’s say you work as a lender on the platform. Initially, with a small number of users and lenders, the platform pays a decent profit to lenders. As the number of lenders increases, the interest rates per person. The problems raised can be solved with a fixed-rate loan solution. With a fixed-rate loan, both parties expect to pay and receive a certain amount at maturity.
Yield protocol development team
Alan Nimerg is the CEO and founder of the Yield Protocol His education is in physics and law Nimreg has a career track record as a data analyst, research, investment and project management. He participated in two projects: Cumberland DRW related to the OTC market and Bluesroot Lab related to transactions in the Defy sector. Alan Nimerg started the YieldProtocol project in 2020
What wallets, tokens and networks does the product protocol support?
Users can use MetaMask Wallet and Ledger to use the Benefit Protocol. Additionally, it is also possible to use WalletConnect. Currently, the yield protocol only supports four cryptocurrencies: Ether, Forex, USDC and Dai. These four tokens can be entered into the Ethereum or Arbitrum network protocol.
How to work with performance protocol?
In this section we learn how to use the Yield Protocol service. First we will talk about lending services, then we will talk about lending services and teams. Income protocol loan service is easy to use. You decide how much you want to borrow, then choose a deadline from the available options. Finally, you provide the required deposit amount.
1. Select the amount and type of token
On the Borrow page, select the digital currency you wish to borrow from the available list. In the “Enter amount” section, select the desired amount. By entering the required amount, the amount of profit is determined. As you can see in the image above, the fixed interest rate and loan term are also listed at the bottom. The interest rate is guaranteed until maturity. After the end of this period, the interest rate is calculated as floating. Users can repay the loan at any time. This affects the interest rate of the loan before maturity.
2. Specification of guarantees
After confirming the number and type of tokens, you need to set the deposit amount. Specify the type and amount of collateral as in the previous step. By selecting “Use Deposit” the system will automatically select the minimum amount required. Yield Protocol recommends a minimum collateral level of 250% of the loan amount to avoid the risk of liquidation.
3. Final Review of Transactions
After completing all the steps, a page with information about the operation will be displayed. If the information is correct, click the “Borrow” button. The transaction is sent to your wallet.
4. Management of debt funds
Users can view the status of their jobs from their personal dashboard. For each fund, a name is chosen that is easier for the user to recognize. These funds are also visible as separate tabs in the lower right corner of the credit page. The type and amount of the loan, the collateral and the repayment period are written on these cards. Clicking on each will open the loan settings page.
As shown in the image above, when you open the card related to a loan, there is an option called Vault Action that gives us several options. We explain each of them below.
Pay off the loan: You may want to pay off the loan early. This includes paying the loan and interest. The problem is, if you pay back early, the interest rate changes.
Rollover loan: Thanks to the rollover loan option, you can defer the loan until it matures. Of course, you have to remember that the new interest rate will be calculated for you after that.
Adding Additional Collateral: To avoid and reduce the risk of liquidation, you can add collateral to your loan using this option.
Collateral Elimination: This is used to reduce the collateral ratio.
View transaction history: View transaction history.
Use of benefit protocol for Iranian users
The Revenue Protocol is a decentralized platform that does not require authentication. Currently, the Yieldprotocol executive team has not released any information about the restrictions imposed on Iranian users. It is also possible to access and enter the YieldProtocol page without needing a VPN, but after entering the Borrow and Borrow section, the section where we want to select the desired token to borrow is disabled and requires a VPN.