Crypto lending has exploded in popularity over the last two years, powering the DeFi boom that’s seen over $52 billion locked into decentralized finance. The bulk of this value has come courtesy of lending protocols such as Compound, Maker, and Aave, currently the top three dApps based on TVL.
The burgeoning crypto lending market is not without its downsides, however. For one thing, borrowers and lenders are limited to assets that are native to the blockchain in question, usually Ethereum. And for another, they’re at the mercy of high network fees on the blockchain in question — again, usually Ethereum.
Not only has this served to constrain the available assets that can be collateralized, lent, and borrowed, but it’s priced small DeFi users out of the market due to the unreasonably high fees; interacting with the smart contracts that control lending protocols such as Maker can easily run into the hundreds of dollars.
Relite Finance is a new crypto lending protocol that’s on a mission to achieve full interoperability — and no prizes for guessing the ecosystem where they’re establishing a base. That’s right, Polkadot, the blockchain of blockchains whose scalable architecture and cross-chain compatibility makes it ideally suited to projects pursuing the holy grail of complete interoperability.
Why Relite Has Set Its Sights on Polkadot
There are various ways to move assets between blockchains. These include using centralized exchanges to swap in and out of assets, and blockchain bridges, which provide a non-custodial means of changing chains. However, each of these methods has its downsides, including lengthy delays in transactions being confirmed and high fees in the case of certain networks and bridges.
Polkadot has taken a different approach to moving assets between chains by enabling data — and thus value — to be transferred seamlessly between any one of its parachains, each of which is connected to the main relay chain. This is the backbone that holds the Polkadot ecosystem together and allows assets to move freely with high throughput and at extremely low cost.
By building on Polkadot, Relite will incorporate native Bitcoin and Ethereum assets into the lending platform it’s building. There are, in fact, three pillars at the heart of Relite’s mission — interoperability, sustainability, and simplicity — but here, we intend to examine only the first.
Why does interoperability matter, and why will solving this problem result in a giant leap for crypto lending?
Uniting the Chains
As the cryptoconomy has grown, it has become fragmented, with value, liquidity, and users scattered across multiple chains, platforms, and dApps. While many of these ecosystems have impressive tech, outstanding developers, and passionate supporters, they are pulling in different directions. This has resulted in siloed ecosystems, almost like islands in an ocean, connected by bridges incapable of handling traffic volume attempting to move between them.
The Relite team believes that Polkadot offers the best solution to “chain maximalism” — i.e. the notion that one blockchain must conquer all and its competitors must wither away. Despite being touted as an Ethereum killer, Polkadot is anything but. In fact, it is an Ethereum complement, designed to work in tandem with Eth, connected by a shared EVM courtesy of projects such as Moonbeam.
Relite has identified three primary reasons why it’s staking its future on Polkadot, where its crypto lending and borrowing platform will be built out:
- Solidity contracts can be deployed to Polkadot, allowing Ethereum-native applications to be ported over.
- DOT, ETH, ERC20 tokens, and other major blockchains’ assets can all be accessed through one integration.
- Polkadot bridges enable chains to communicate with one another while retaining their technical sovereignty.
That, in a nutshell, is the value proposition behind Polkadot and the reason why Relite is setting up shop there. As for the sort of shop Relite Finance is constructing, here’s what’s in store:
- A user-friendly interface for lending and borrowing
- Low fees when interacting with smart contracts
- Access to cross-chain assets including DOT, ETH, and BTC
- Lower collateral, enabling users to borrow higher amounts
To achieve this, Relite will be utilizing the best of both worlds: smart contracts coded in Ethereum’s native programming language, Solidity, and the Moonbeam parachain that connects to Polkadot’s relay chain. Chain bridges will be used to enable cross-chain transactions, bringing about full interoperability with other blockchains.
If Relite succeeds in its mission, it will usher in an era of faster, cheaper, and broader crypto lending, making this DeFi primitive accessible to retail users. Should this vision come to pass, no one will be priced out of accessing lending and borrowing services thanks to Polkadot’s scalable framework and Relite’s commitment to unlocking the true value of cross-chain lending.
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