Another Way to Earn Interest on DeFi With Bancor, Real Assets as Collateral, USDC Reaches $1 Billion

Good morning defiers! here’s what’s up in DeFi:

  • Bancor launches Relay Tokens

  • Fluidity’s model for tokenizing real assets as MakerDAO collateral

  • USDC reached $1 billion issued

  • One estimate shows value locked in DeFi exceeding Ethereum’s current market cap in three years

Another Way to Earn Interest on DeFi

Decentralized exchange Bancor is making it easier to become a liquidity provider and start earning fees.

Bancor works by holding its own native BNT token as a reserve currency to facilitate the automated exchange of any token in the network. The idea is that it doesn’t matter how illiquid the pair is, having BNT in the middle makes the trade instant and closes the bid/ask spread.

For this to work, certain ratios between the amounts of BNT and other tokens have to be kept and liquidity providers called Relays are incentivized with a small (0.1–0.3 percent) cut of the trade, but it was recommended they provide at least $20,000 of total value. Now, anyone can start providing liquidity and earning fees by buying Relay Tokens that represent specific liquidity pools, for example, the token for the DAI relay is DAIBNT.

It will be interesting to see how risk and return for Bancor’s liquidity providers compare with staking tokens on proof-of-stake chains or lending out tokens on DeFi protocols.

Tokenizing Real Assets for MakerDAO Collateral

Multicoin Capital’s Ben Sparango tweeted that Fluidity’s whitepaper published last week about tokenizing real assets as MakerDAO collateral did not get nearly the attention it deserves and he’s right; it’s pretty cool.

The idea of the model is to one day obtain leverage on real world assets when MakerDAO launches DAI loans based on collateral other than ether, known as multicollateral DAI (MCD).

Fluidity executed a pilot using U.S. Treasury securities as the underlying collateral in the MCD system, to be later used as a roadmap for other assets, like real estate and corporate bonds. At the core of the model is what they call a Tokenized Asset Portfolio, which is a special purpose vehicle (SPV) that holds the asset (in this case T-bills). The SPV beneficiary generates an ERC20 representing a share of the T-Bill collateral. The ERC20 is then used as collateral for a Dai loan.

“For starters, this could potentially make the MCD MakerDAO system *incredibly* stable. T-Bills are historically some of the most stable securities available,” wrote Sparango. “Secondly, people have been talking about tokenizing securities since the dawn of Bitcoin. With the exception of a few tokenized real estate projects, we really haven't seen this materialize yet. Tokenizing T-Bills in MCD could be the spark that really gets this trend moving”

USDC Reaches $1 Billion Issued in Less Than a Year

USDC, the stablecoin co-founded by Circle and Coinbase through the CENTRE Consortium, surpassed $1 billion issued on Monday. The amount of USDC redeemed for US Dollars nears $600 million and on-chain transfers reach about $16 billion, according to the release. USDC’s market cap is above $430 million, and it is firmly the second-largest stablecoin in the world. USDC’s integration with major DeFi platforms is one of the main reasons for the stablecoin’s growth.

DeFi Growth Estimates

With P2P lending on course to become a $460 billion dollar industry in the next few years, according to Allied Research, DeFi is in the perfect position to capture a sliver of this market. The current size of the DeFi lending space in total locked value (TVL) is sitting around $400M – a mere 0.08% of the potential market in 2022, writes
Lucas Campbell, Director at Fitzner Blockchain Consulting.

If DeFi captured 5 percent of the $460 billion p2p lending market in the next three years, that would result in $23 billion in TVL. This would nearly exceed Ethereum’s current market cap of $24.6 billion, Campbell wrote.

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