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Decentralized financial service B.Protocol announced a new version of its plan that will improve the liquidation of under-collateralized loan positions on loan platforms.
In a press release issued on Tuesday, the DeFi lending platform’s supporting liquidity agreement revealed that the upcoming v2 is based on A novel Backstop automatic market maker (B.AMM) written by several anonymous community members.
According to a Blog post The v1 design released by B.Protocol founder Yaron Velner using professional liquidators instead of miners to share profits with users is not enough to solve the problem of capital inefficiency.
Unlike centralized exchanges such as Binance that provide leveraged trading up to 100 times user deposits, the leverage of decentralized exchanges (DEX) rarely exceeds 5 times. Although the DEX platform can use a large pool of liquidity, the leverage limit is significantly reduced.
For Velner and the authors of the B.AMM white paper, DEXes’ poor leverage restrictions forced lending platforms to take a conservative attitude towards their loan collateral factors. In fact, due to the high slippage and low spread of AMMs such as Uniswap and SushiSwap, liquidation on DeFi lending platforms seems to be limited to flash loan arbitrage.
DeFi lending platforms like Maker utilize a market maker manager (or custodian) system to perform functions such as liquidation.These breeders have always been the focus of review Black Swan Incident It’s like Black Thursday in March 2020.
However, as Cointelegraph reported before the beginning of June, the DeFi liquidation mechanism is in “May’s liquidation tsunami. “
B. Protocol’s solution to this problem is in the form of a platform that allows users to provide liquidity for possible liquidation through automatic rebalancing agreements-debt repayment in exchange for collateral-by converting collateral into automatic repayment of debt Balance agreement.
According to the Velner and B.AMM white papers, the rebalancing process will be based on the Curve Finance stable swap invariant used for asset pricing. The stable swap invariants are designed for related asset pairs like Dai (DAI) And Tether (USDT), B.Protocol v2 will expand it into unrelated pairs, such as DAI and Ether (Ethereum).
In a conversation with Cointelegraph, Velner explained how to extend stable exchange invariants to unrelated asset pairs applicable to B.Protocol v2:
“The system is designed for unrelated assets. This is possible because the system relies on external price feeds (such as Chainlink). Curve Finance’s stable swap invariants are only used to determine discounts during rebalancing.”
related: Cointelegraph Consulting: DeFi suffered a liquidation tsunami in May
By using external price feeds like Chainlink, B.Protocol asset pricing can be summarized in U.S. dollars.
According to the B.AMM white paper, the proposed high-leverage DeFi clearing platform can handle up to $1 billion in clearing per month. The announcement also revealed that the DeFi lending platform can increase its mortgage factor by up to four times on B.Protocol v2.
In addition to the possible increase in the collateral factor of DeFi loans, Velner also told Cointelegraph that the team simulated the agreement during the turbulent period in May, and the results showed that users received considerable benefits.
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