DeFi and NFT platform SYNC Network recently announced the launch of peer-to-peer lending on their platform to provide lenders with greater security.
SYNC, the ethereum-based platform, aims to mitigate risk and bring stability to the DeFi space with the help of a time-locked, reward-generating NFT called CryptoBonds. To put this in perspective, the 1,800 CryptoBonds created so far have grown in value by an average of over 203%, which easily covers the recent downward trend in cryptocurrencies that has led to a 75% drop in SYNC.
Since its inception, SYNC has seen steady growth and has recently managed to partner with some of the biggest names in the DeFi space, such as TrustSwap (SWAP) and DexTools (DEXT). Now, in a recent development, SYNC Network has announced the launch of 100% secure peer-to-peer lending on its platform.
The platform claims that the move is to enable users to lend and borrow capital on CryptoBonds in a trustless manner. Borrowers on the platform can use CryptoBonds, which consist of liquid pairs and equivalent SYNC tokens, as hard collateral to borrow capital. Within the SYNC ecosystem, the term and interest rate of the loan is dynamic and agreed upon by the borrower and the lender.
According to the developers of the SYNC network, this method of lending against CryptoBonds can provide an unprecedented level of security for both lenders and borrowers. Borrowers on this platform are not subject to a minimum collateral maintenance requirement. Borrowers will not be liquidated if the value of the collateral fluctuates during the course of the loan.
For the lender, the collateral is stored in ESCROW for the duration of the loan. If the borrower fails to make payments on the loan, the lender becomes the new owner of the CryptoBond as described above, protecting the lender from financial risk.
The lender also receives a cashier’s check NFT – a debt instrument much like a real-world cashier’s check is a tangible representation of the loan. If at any time the lender wants to return the money they lent by a specified maturity date, they can sell their NFT on the NFT marketplace.The user who buys their NFT will become the new lender, and the previous lender will get his money back with undisturbed liquidity.
The introduction of P2P lending for a new asset class – crypto bonds – has the potential to create a safe space for borrowers and lenders. It could strengthen the DeFi ecosystem by ensuring that CryptoBond’s liquidity remains untouched throughout the process.
While the SYNC network is currently deployed on the Ethernet mainnet, the platform is developing a second version (V2) of the network, potentially with multi-chain and multi-DEX capabilities, making a big leap forward in the broader DeFi ecosystem.
Incentives for long-term liquidity providers
The rise of a betting culture in DeFi has opened up new possibilities for projects and traders in the ecosystem. Betting has become a popular way for DeFi projects to create liquidity and build trustless networks, while for traders, betting offers new opportunities to earn rewards with their assets. This simple mechanism has become so popular that ETH holders recently staked $14 billion worth of tokens on the newly launched Ether 2.0 network.
Despite this popularity and success, today’s betting mechanism is one of the biggest factors contributing to the volatility of the ecosystem. The betting platform allows users to withdraw their funds at any time, causing a lack of liquidity and the collapse of other promising projects. However, SYNC Network claims to have found a solution to circumvent this problem.
The network has introduced a new asset class, CryptoBonds, which are reward-generating, time-limited NFTs.CryptoBonds consist of two parts – the first part consists of liquidity matching tokens and the second part consists of SYNC tokens of equal value. Users first need to provide liquidity to Uniswap to receive the corresponding LPTs.These LPTs are then locked in with an equal amount of SYNC tokens to create a crypto bond.
Users can create CryptoBonds for a fixed period of time, lasting between 90 days and three years. These bonds earn income from providing liquidity and interest on the SYNC portion of the bond. Once the bond expires, users can pocket locked SYNC tokens and newly mined SYNC tokens. The longer the term of the bond, the higher the annual interest rate on SYNC, thus incentivizing long-term liquidity providers.The SYNC network says these rewards can exceed regular staking rewards.
Users who want to exit their positions within a set period of time can simply sell their crypto bonds on the NFT market, as the core of a crypto bond is still just NFT. the liquidity locked into the bond remains constant throughout, creating a sense of stability for investors and projects. They can also use the bonds as collateral for P2P loans.
What’s in store for the future?
CryptoBonds, although relatively new to the market, has seen great success so far. Out of all 1,800 bonds that have been created, there are over $6 million worth of cryptocurrencies locked up. By making them the standard for DeFi bets, projects in the ecosystem will have a foolproof way to incentivize long-term bettors and farmers in the network. The time-locked liquidity ensures that only serious users can join, effectively avoiding pump-and-dump situations. This in turn mitigates risk for investors and creates a safe space for all participants in the ecosystem.