Latest Updates for Mars Lending Platform
Dear Mars Hitchhikers:
Thanks for the continuous support of Mars Ecosystem; we are truly grateful! In the past few weeks, we’ve dived into crypto lending products and can’t wait to share the latest updates with all of our community members!
Now, let’s walk you through the progress we’ve made so far:
1. Further analysis of the P2P lending model for specific operational and technical feasibility.
1.1 The analysis of Venus Protocol ode logic and the impact
1.1.1 At the current stage, Venus Protocol is the largest lending protocol on BNB Chain. Our initial goal is to optimize Venus lending rates to achieve more efficient asset utilization and to increase the liquidity of lending assets in the BNB Chain.
1.1.2 In the process of analyzing the code of Venus Protocol, we found that each Venus Market has a “Borrow cap” parameter, which means that when the total lending limit of a market reaches a set threshold, that market will no longer allow lending. We have discussed the possible impact of this parameter at length. It is currently believed that this parameter may create a risk of cashing out the assets of Mars Agreement users.
1.1.3 For example, the potential risks may occur as follows: Suppose a user attempts to withdraw his previously deposited assets from the Mars Lending Pool, and the Mars protocol will lend the assets from Venus to pay the user’s principal. When the corresponding Market Pool in Venus is approaching the set “Borrow cap” threshold, Mars may not be able to complete the lending and the user will not be able to withdraw his deposit.
1.1.4 We have explored many different solutions to address this issue, however, the risk remains unavoidable.
1.2 Data modelling was conducted to simulate how the combination of the Mars Lending Platform and Venus Protocol would change under different market behaviours and parameters, with respect to the size of the existing pools of Venus, utilization rates and LTV parameters. Ultimately, we identified a concern that this P2P-based model has limited liquidity to attract, and because it has a strict interest rate matching mechanism, the capacity bottlenecks when liquidity reaches a certain size, resulting in revenue capacity that does not meet expectations.
2. In addition to analyzing the P2P lending model, we also focused on completing the business design and partial code development for the leveraged lending model.
2.1Business model research and design
2.1.1 Complete a detailed study of the advantages and disadvantages with typical lending protocols such as AAVE/COMP. The conclusions are as follows:
- The Interest rate advantage: Because of the difference in collateral mechanisms, Mars lending models can offer better lending rates.
- Leverage rate: The Mars lending model is more leveraged and less costly.
- Capital utilization: With its obvious leverage property, the capital utilization rate will be significantly higher than that of traditional lending.
- Market size: Mars lending has richer scenarios for using funds.
- Liquidation model: With the different liquidation logic, Mars Lending Platform is more stringent due to the leverage benefit and clearing. Also due to the complexity of the logic, the gas costs are slightly higher.
- Revenue capacity: Comparable to traditional lending protocols in terms of revenue capacity for the same capital size and parameters.
2.2.2 The algorithmic logic of Borrow APY:
Referring to typical lending protocols such as AAVE/Compound, we also use the Variable Interest Rate Model (VIRM) and control the borrowing rate curve by capital utilization. We finally determined the following Borrow APY calculation formula.
2.2.3 The technical feasibility analysis to complete the BNB Chain application layer protocol includes:
- PancakeSwap/PancakeFarm Strategy Docking Logic
- Beefy Strategy Docking Logic
- Stader Strategy Docking Logic
2.3 Risk Control Design
2.3.1 Complete the measurement and parameterization of leverage ratio
- We need to fully calculate the LTV (Loan to Value) parameter in order to balance the leverage level with the liquidation risk. And LTV represents the leverage capacity at the same time. Leverage can be simply expressed as the following formula. Leverage = 1 / (1-LTV)
- Based on the revolving lending, gas fee and other cost factors, we’ve compared the mainstream lending agreements in the market to measure the maximum theoretical leverage of each market.
- We have now completed the settlement of leverage ratios for all markets and can leverage up to 18x. In some high risk Markets, it is still possible to achieve no less than 2.85x.
2.3.2 Complete liquidation model structure design
- The liquidation process relies on several sub-modules, such as Strategy Router, Adapter, Oracle, etc. The development of the main monitoring module has been completed.
2.3.3 Collateral risk control strategy design
- In different scenarios, the strategy will receive different Tokens, including collateral, various types of LPs and revenue tokens, etc. We have done measurements for the tokens of the three protocols selected in Phase I, and identified 11 mainstream tokens and LPs that can be supported by the current risk control logic.
2.3.4 Security Analysis
Full research on attacks, and audit reports (16 reports in total) of 7 mainstream lending type protocols (including leveraged lending) in the market.
3.1 Completed the Integrated account smart contract development.
3.2 Completed the design of Core code architecture and Controller contract development. After the strategy adapter is completed, we will do the debugging.
3.3 Complete the design of Strategy routes
3.3.1 Design and development of strategy router for currently identified policies, including:
- PancakeSwap adapter
- BiSwap adapter
- Pancake Farming adapter
- Beefy Farming adapter
- Stader stake adapter
3.4 Deploy Pancake and Stader smart contracts in the BNB Chain test network for debugging individual adapters and later joint debugging.
- Other underlying protocols are being deployed
We will continue to share with the community about the progress of our work and thank you for your support！
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The Marsecosystem Team