Daily headlines, crypto price charts, and social media have engraved the narrative of volatility being a feature of DeFi and crypto in the masses. Anything DeFi or crypto with no mention of the word ‘volatility is viewed with a filter of skepticism. Contrarily, most content on DeFi and crypto use ‘less volatility’ as a must-have for a better future.
While volatility is exciting and keeps the users on their toes, it also deters investors who yearn for stability, making DeFi inaccessible to the masses. In this position of stalemate, there is a definite need for products that are built on the lines of stability for future adoption and use. This not only empowers current users but also paves the way for newer market participants to adopt DeFi products. In the current DeFi landscape, however, there is a serious lack of such products.
The Current Landscape Of DeFi Products
The whole DeFi ecosystem seems to be growing at an unprecedented rate today. Even though the market made a pitfall in May this year, it was able to effectively recover and most DeFi projects are now more valuable than ever. But, if you look beneath the surface you realize that this industry is teeming with projects that lack innovation and a future vision. Most of the DeFi products today are built around short-term profits and hardly seem to incorporate the vision of mass adoption.
This gives rise to a highly volatile landscape that does not appeal to the world markets. To add to this, a majority of projects in DeFi also face a lack of liquidity. This further increases the market volatility and creates an atmosphere where asset prices can easily be manipulated. For DeFi to outgrow and eventually replace traditional finance it is important to incorporate some of its tried and tested systems. Especially in the aspect of decentralized lending and borrowing, DeFi could take a cue or two from traditional finance to unlock and better utilize locked liquidity.
The Void In Decentralised Lending And Borrowing
The global lending market is worth $6.9 trillion. In comparison to this, the DeFi lending market worth $106.58 billion accounts for only 1.5%. Behind this unparalleled success of the traditional lending market is a system of tools that have enabled financial institutions, businesses, and individuals to effectively control their yield and better utilize liquidity. Products like rate trading and interest swapping have existed in the financial markets for decades and enabled players to have a level of control over their expected yield.
In the DeFi landscape, however, there is no way for lenders to control their expected yield. They’re on a constant rollercoaster ride with APYs fluctuating between extremities. This is because the interest rates on DeFi lending protocols are also constantly fluctuating. If users could have control over their interest rates, they would also have control over their overall yield, creating a stable financial environment. The kind that can attract larger financial institutions.
While there have been quite a few protocols attempting to achieve this, it is Unreal Finance that hits the bull’s eye with its vision.
Concept Of Fixed Interest In Yield Farming
Unreal Finance is a DeFi yield futures platform that revolutionizes the concept of lending and borrowing in DeFi. Taking cues from the established traditional finance, the protocol aims to bring to DeFi the tools that have made that industry so successful. But, along with this, the protocol also introduces a combination of products that set up DeFi for the big goal of mass adoption.
While facilitating interest swapping in DeFi, Unreal Finance gives it a new dimension by allowing users to tokenize and lock interest rates on the platform. This gives users a break from fluctuating interest rates and an unprecedented level of control over their expected yield. When users provide liquidity to DeFi protocols through Unreal Finance, they receive yield-bearing tokens and ownership tokens.
These tokens separate the yield from its underlying staked assets and create opportunities for users to speculate on and trade this yield across platforms. This means that they get access to their future yield instantly.
The advantage? Unlocking a tremendous amount of liquidity that can be used across the ecosystem. When liquidity increases, stability increases across DeFi protocols. This combined with controllable interest rates and instant yields significantly reduces the volatility, attracting world markets to DeFi.
Reducing Volatility; The Gamechanger For DeFi
The future growth and worldwide acceptance of DeFi are largely dependent on volatility. Only when volatility is reduced will DeFi become appealing to the vast majority of users. In this aspect, the introduction of fixed interest rates by Unreal Finance can gear up the industry for mass adoption by significantly reducing volatility. Along with this, the amount of control it gives users over their yield earned can create a sense of stability among investors, attracting them towards this space.