For many people, this is the first time seeing that it is possible to lend and borrow on DeFi. We have truly transitioned into a world where intermediaries & central authorities can be removed from financial transactions; now, the power is in our hands.
The lending and borrowing process embedded in DeFi is permissionless, and these transactions are carried out on Decentralized exchanges. These exchanges ensure that peer-to-peer transactions are completed without any interference by an intermediary.
An intricate aspect of borrowing and lending is the decentralized protocols through which the transactions are verified and completed. This is where AAVE, Compound, and Mountanaz (MNAZ) come in. Let’s look at how borrowing and lending have been made accessible in DeFi and how people can expand to different areas of the metaverse.
When you look at the construct of AAVE, you would realize that the peer-to-peer platform provides users with a stable interest rate reflected by the price of a given asset in the cryptocurrency market. Moreover, AAVE uses an algorithm that helps check the amount borrowed from pools with a proper tracking system.
The decentralized protocol’s token is another interesting feature of AAVE in ensuring that users can easily borrow and lend on the platform. AAVE has two tokens that perform different tasks; the first is the aToken, while the other is the AAVE token.
The aToken can be used as collateral for the loan, and it is also a medium through which users earn interest. On the other hand, AAVE is an ERC-20 token that allows holders to participate in staking. It is a governance token on the platform and ensures that transactions are appropriately verified.
Flash Loans are one of the features that have made AAVE popular among investors. The interest accumulated on a transaction is recorded and given as aToken, which users can add to their wallet and withdraw anytime.
Compound is quite similar to AAVE in that both platforms are decentralized protocols that ensure people borrow and lend without any intermediary controlling the transactions. One thing that stands out for Compound users is that the Ethereum smart contract, which contributes to the asset pool, allows people to pay a debt in a digital currency they may not own.
Compound, just like AAVE, declares a small part of each pool to be marked as reserves because of the volatility of the cryptocurrency market.
This is one of the latest decentralized platforms built on the Balance Smart Chain; Mountanaz seeks to change the landscape in terms of reducing the wait time for a user to pair with a willing lender.
The pooling strategy which the decentralized protocol adopts entails creating a liquidity pool that ensures equal distribution of assets. This platform thrives on the amount of liquidity for all forms of digital assets.
The introduction of flash loans, which has worked tremendously for AAVE, is a feature Mountanaz has adopted. Plus, the native token, which is MNAZ, allows holders to be a part of the Mountain’s present and future. In the same vein, MNAZ is the gateway through which people looking to pay debt can do so on the network.
AAVE, Compound, and Mountanaz use fact-checkers known as Oracles that help with the computation seeing that transactions will be coming from multiple sources. The governance of all three cryptocurrencies is based on the Decentralized Autonomous Organization (DAO), which is controlled by the key members who have contributed to each platform’s services. These three powerhouses will revolutionize DeFi and other aspects of the metaverse to improve each user’s experience in all of these ways.
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