Lending Protocol: How to lend ETH or USDT on StaFi
To date, lending & borrowing of crypto assets has been the largest sector for decentralized projects. So many high-quality platforms have been developed that enable individuals to borrow and lend directly on a particular platform without third parties.
In order to gain passive income on their investments, Crypto investors can lend on decentralized platforms and then earn interest from the fees charged on borrowers. This is a very enticing option for lenders because, without exposing their private keys to a third party, they will still be able to receive relatively low-risk interest on their investments.
Recently, we have witnessed the proliferation of quality, decentralized lending platforms such as Compound, Dharma, dYdX, MakerDAO, etc. In this article, we will be discussing how to lend ETH or USDT on one of the most advanced cryptocurrency platforms, StaFi.
Staking Finance (StaFi) is a cryptocurrency platform with a protocol built to resolve the discrepancies between Mainnet and Token Liquidity in the Proof-of-Stake network.
The Proof-of-Stake (PoS) protocol was created as a substitute for the power consuming and complex Proof-of-Work (PoW) protocol but it is also not without its problems.
In the Proof-of-Stake system, most platforms are doing their best to provide a higher staking ratio for their users, and at the same time, try to secure the future of the platform by locking tokens for a particular period in order to avoid irresponsibility by bulky token stakers.
With locking of these tokens come security of the network but the value of the token is negatively affected due to zero liquidity. This is why StaFi came up with a protocol to solve this problem for staking networks through the issuance of rTokens, also known as Reward Tokens. This process will help create a decentralized liquidity-providing protocol that will enable locked assets to circulate freely. Liquidity is assured with the issuance of rTokens, and the initial tokens staked on the chain remain largely unchanged in order to secure the system.
rToken is a redeemable token provided by the StaFi protocol specifically for staked assets. These tokens can come in the form of rETH for staked Ethereum tokens, rATOM for staked ATOM tokens, etc. rTokens can be exchanged, lent, or borrowed in different authenticated platforms.
Depending on the amount of the native tokens staked in the Staking Contract and the value of the particular rToken involved, a given number of rTokens is issued when a user stakes a native token through the appropriate Staking Contract. Furthermore, as staking rewards accumulate for the Main token of a particular platform, the value of its rToken will gradually increase, and so will the amount of its redeemable native tokens.
Following the development and sponsorship of 5 rTokens: rETH, rATOM, rFIS, rDOT, and rKSM, StaFi will facilitate the development of rToken protocol specifications for various public chains by helping numerous Proof-of-Stake projects build their own rTokens.
How to Lend ETH or USDT on StaFi (rTokens Usecase)
StaFi aims to collaborate with decentralized lending platforms to offer lending services to rToken holders. For example, if a rToken holder does not want to sell rTokens but still desires liquidity, the individual will deposit rTokens on lending platforms to borrow either ETH or USDT.
Decentralized lending platforms offer loans to businesses or to the public. Traditional institutions also provide this, but there are notable differences when compared to decentralized platforms. Decentralized lending platforms are usually non-custodial, processed without KYC, and concentrate only on cryptocurrencies. The interest rates paid often differ based on the market’s supply and demand but are usually lower than the rates offered by centralized lenders. Furthermore, as anyone can access it, Decentralized platforms are simpler, and the transactions are registered on public blockchains.
StaFi’s rTokens are added to decentralized lending platforms in which these tokens are lent to borrowers and income is generated from charges. For instance, you wish not to sell your rTokens but still want liquidity, you can lend your rTokens to decentralized platforms like Uniswap and Equilibrium, and borrow USDT or ETH instead.
All you have to do is deposit the rToken in the specified decentralized lending platform in collaboration with StaFi, lend these tokens, and earn passive income.
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