Hashstack Finance launches undercollaterised loans through Open Protocol

Decentralised finance exploded onto the scene in 2020 (“DeFi Summer”), as numerous platforms sprung up hoping to disrupt the centralised framework that has governed borrowing, lending and everything in between for most of modern financial history.

After the initial hype simmered down, progress has continued, although definitely slowed form those halcyon days. One problem that has proved difficult to solve is that of overcollaterised borrowing. Due to the volatile nature of cryptocurrency, loans normally must be overcollaterised – commonly at 150% – to protect the lender in the event of large market downturns. Obviously, this drags the efficiency of capital, with the borrower sacrificing more than the value of the loan.  

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With the prospect of using crypto to collaterise your loan very attractive, but the necessity to lay down too much crypto to do so unappealing, it has become a problem.  

Hashstack Finance, through its Open Protocol, is looking to solve this problem.

Open Protocol

This afternoon, Hashstack Finance have officially announced the launch of the public testnet for Open Protocol, which will offer non-custodial, under-collaterised loans. The permitted collateral-to-loan ratio is 1:3, representing an enormous improvement on the standard 1.5:1 arrangement across DeFi. The bulk of the loan must be used on the platform, with traders able to withdraw up to 70% of the collateral amount to trade elsewhere.

For example, $1000 of collateral will allow a trader to borrow $3000 through the protocol. Of this borrowed amount, you can withdraw 70% of the collateral amount off the platform, which in this case would be $700. So, $2300 must be traded on the platform and up to $700 can be withdrawn and used elsewhere.

Our public testnet has attracted over US$5 million in total value locked (TVL) immediately after going live. The public testnet release marks a significant accomplishment in Hashstack’s roadmap as we prepare to launch the Open Protocol mainnent later in the second quarter of 2022

Hashstack Finance founder Vinay Kumar

Utilisation of Capital

Hashstack has also integrated with other platforms, in order to improve utilisation options for the loans within the Open Protocol. An example of this integration is Pancake Swap, allowing traders to carry out in-app swaps. The team is also working on integrating several dApps within the protocol, with plans to submit an Ethereum Improvement Proposal (EIP 9000) to aid smart contract development.

But the mere fact that investors no longer have to provide the onerous 150% collaterisation requirements is likely to be a huge boon. One of DeFi’s main goals was always to be efficiency of capital; with a 3:1 LTV number now possible, the Open Protocol is helping to deliver on that promise.