In recent years, the decentralized finance (DeFi) sector has witnessed enormous growth, with over US 9 billion in crypto assets stored in DeFi platforms. Despite its incredible growth, the DeFi sector faces several known risks. DeFi lending platforms typically issue decentralized stablecoin loans collateralized with tokens, usually ETH.
To get such loans, borrowers need to stake more than they borrow. For instance, a loan of $500 requires staking $1000 worth of the token. However, this system of lending is vulnerable to liquidity risk since cryptocurrencies are quite volatile as susceptible to a sudden price drop. Drop-in prices on token taken out as loan can lead to a liquidation cascade where DeFi users’ positions become liquidated.
Chalice. Finance is a revolutionary DeFi platform that seeks to alleviate liquidity risk in the DeFi lending sectors by protecting user positions against price fluctuations. Here’s how the platform eliminates liquidity risk in the quickly expanding DeFi lending sector.
Chalice.Finance is a DeFi lending platform that offers users collateralized loans & stable coins on many ERC-20 crypto assets. The platform also offers multi collateral debt positions accommodating BTC and other top 10 cryptocurrencies by market cap.
Additionally, Chalice. Finance integrates the Chalice network, which features an algorithm that allows users to take loans, i.e., self-issue loans autonomously.
Integration of the Chalice Protocol
As mentioned above, Chalice. Finance integrates the Chalice Protocol built on the Ethereum blockchain. The protocol is the core attribute of Chalice. Finance and functions to allow users to create their own cryptocurrency.
Elements of the Chalice Protocol are the Chalice Collateral Vaults, Chalice (CHAL & CHALx) token, Oracles. Essentially, the Chalice Protocol functions to govern the Chalice Protocol by deciding on key factors such as stability fees, types, and rates of collateral through the voting power of Chalice holders.
Features of the Chalice Protocol includes:
- Self Issue Loan- Through the Chalice Network, users can self-issue loans by simply instructing the platform
- Multi-collateral Debt — Chalice Network allows users to take loans by using their cryptocurrency holdings as collateral
- Stable-coin — Chalice Network issues loans to users in a stable coin format, i.e., USD-pegged stable coin. The most commonly issued loan is BUSD/USDT.
Collateral Assets and Liquidation
Users can collateralize their crypto assets on the platform in exchange for USDT/BUSD and the CHALx Stable coin. CHAL holders vote to accept a collateral asset, i.e., a digital asset that can be accepted into the Protocol.
Collateral assets held in Chalice Vaults on the Chalice Protocol functions to keep CHALx stable. In the generation of CHALx, the Chalice Protocol accepts any ERC-20 token approved by CHAL holders as collateral.
CHAL holders also vote to approve certain, conforming Risk Parameters for each accepted collateral. In the approval, more risky assets are evaluated using Risk Parameters while more stable assets are evaluated using less strict Risk Parameters.
The governance mechanism of the Chalice Finance Protocol is developed to be as flexible and upgradable as possible. To vote or submit a proposal within the ecosystem, users must first hold and stake CHAL.
Each staked CHAL equals 1 vote within the platform. Also, to propose a topic for voting, users will be required to deposit USD 100 worth of CHAL.
CHAL holders can vote to implement several issues, including:
- Determine the set of Oracle Feeds
- Determine the set of Emergency Oracles
- Choose to upgrade the system.
- Trigger Emergency Shutdown
- Introduce a new collateral asset type with a unique set of Risk Parameters
- Change the Risk Parameters of one or more existing collateral asset types or choose to introduce new Risk Parameters to one or more existing collateral asset types.
How Does Chalice.Finance Eliminate Liquidity Risk?
Chalice. Finance protects its users from liquidity risk by employing the Chalice CDP Auction-a system that automatically liquidates the collateral if the debt-to-collateral value falls beyond a set threshold.
Additionally, each collateral asset deposited on the platform requires its own Vault. The protocol allows users to own multiple Vaults with different types of collateral as well as levels of collateralization.
Chalice Governance controls Risk Parameters
To protect its users from liquidity risk, the Chalice governance system controls several risk parameters via a consensus. Chalice Vault on the platform has its own set of Risk Parameters that enforce its usage.
The risk parameters are determined by evaluating the collaterals’ risk profiles directly controlled by CHAL holders via voting. The risk parameters controlled by Chalice governance are:
- Debt Ceiling : Debt Ceiling refers to the maximum amount of debt that can be created using a single collateral type. Every collateral type on the Chalice protocol is assigned with a Debt Ceiling. On reaching its Debt Ceiling, additional debt cannot be created unless users pay back all or a portion of their Vault debt.
- Stability Fee : Stability fees is an annual percentage yield of the CHALx generated against a Vault’s collateral. It’s paid in CHALx and held in the CHAL Buffer.
- Liquidation Ratio : CHAL holders determine an ideal liquidation ratio on each collateral loan. A high liquidation ratio leads to increased volatility, while a low liquidation ratio causes low price volatility of the collateral.
- Liquidation Penalty : Liquidation penalty is the fee added to a Vault’s total outstanding generated CHALx if liquidation occurs. Liquidation Penalty necessitates Vault owners to hold appropriate collateral levels to avoid liquidity risks.
- Collateral Auction Duration : Each Chalice Vault has its maximum duration of Collateral auctions.
- Auction Step Size : Auction Step Size is vital to prevent bidding abuse and reward early bidders in the auction
Chalice Finance Presale Information
December 2nd, 2020 (Round 1)
December 3rd — 10th, 2020 (Round 2)
- Round 1 (24hour): 1 ETH = 20 CHAL
- Round 2 (7 day): 1 ETH = 15 CHAL
- Hardcap: 500 ETH
- Softcap: 200 ETH
- Total supply : 13.000 CHAL
- Uniswap List: 1ETH = 10 CHAL
- (MIN: 0.1ETH, MAX: 20ETH)
- Reserve 7% = 910 Token (locked 5month, released 20% per month)
- Uniswap Liquidity 21% = 2.730 Token (locked 12month)
- Staking Reward 12% = 1.560 Token
- Public Sale 60% = 7.800 Token
- Unsold token on round 1 and 2 will be burnt 🔥🔥 immediately
- 🦄Uniswap list December 9th, 2020
- *If softcap/hardcap reach will be listed 48hrs after
Despite the enormous growth of DeFi lending platforms, liquidity risk has been a major stumbling block to widespread usability. Currently, liquidity in DeFi protocols is largely outperformed by centralized low-fee liquidity providers in the traditional finance sector.
Chalice.Finance is a revolutionary infrastructure that protects users against liquidity risks by guarding their positions against price volatility in the cryptocurrency space.
Originally published at https://www.cryptofolds.com on December 6, 2020.