As all of you know, Fringe’s Primary Lending Platform has been out for over half a year. Along the way, we have accrued our first traces of a TVL, made progress and definitions shaping up to the final form of the Fringe Finance Platform, and introduced Fringe to the communities of various crypto assets.
As the industry continues to evolve and mature, we’re ready to up the ante with the launch of Fringe’s v2. With a set of groundbreaking features, this latest iteration of our platform is set to bring a new and comprehensive platform to the DeFi lending space.
Let’s take a look at these features.
What’s in v2?
Although we initially anticipated a gradual release, a positive combination of factors will allow us to almost simultaneously launch several items that were previously announced.
This is the culmination of several months of hard work, dedication, and even theoretical work, as some items will be introduced to the market for the first time ever. We can now say that the following features will be rolled out as Fringe’s v2, a major upgrade to our existing lending ecosystem:
First up, we have partial liquidations, a feature that allows for liquidations to only be paid up to a point above the position liquidation threshold. This gives borrowers more flexibility in managing their loans and mitigating risks. Partial liquidations are a significant development for Fringe Finance and will help to create a more efficient, stable, and attractive platform for both borrowers and investors.
One of the most significant benefits of partial liquidations is for borrowers. Under this model, borrowers are only charged the liquidator reward fees associated with the partial liquidation to bring the loan back above the minimum collateralization level. This is compared to the current system, where borrowers face liquidator reward fees on a full liquidation. Furthermore, borrowers will retain the remaining open loan position they entered into and thus will still be positioned according to their original intent. These benefits will make borrowers’ experience better.
Additionally, partial liquidations could improve the liquidity of the platform, which could make it more attractive to new users.
With this development, more liquidators are incentivized to participate, given the lower secondary market liquidity requirements to dispose of collateral won in a liquidation. This makes Fringe’s liquidation process more efficient and reduces the likelihood of positions becoming insolvent, thus improving the Fringe platform’s stability.
Atomic Loan Repayments
Next, we have atomic loan repayments, a feature that simplifies the repayment process by enabling borrowers to repay their loans in a single transaction.
Atomic loan repayments make it easy for borrowers to pay off loans without having to gather the exact lending assets required to repay. Instead, the PLP will automatically use the collateral asset that backs the loan to repay it, swapping some of the collateral assets for the lending asset through a DEX.
The lending assets obtained through the swap will then be used to repay some or all of the outstanding loan. This streamlines the repayment process and creates new opportunities for leveraged long/short options.
No more juggling multiple transactions and paying rounds of gas fees.
Multi-Asset Lender Tokens
This new feature allows lenders to lend (and borrowers to borrow) assets beyond $USDC, currently the only supported lending asset.
With Fringe’s v2, users can now access a broader range of assets, such as different stablecoins and most of our listed collateral assets, including top-tier assets like $wBTC and $ETH. This feature is a game-changer for the Fringe Finance Platform in terms of diversification and risk management, also reducing reliance on any one asset.
Moreover, Fringe v2’s multi-chain support will enable users to access lending services across various blockchain networks seamlessly. In particular, as mentioned in our October 2022 monthly update, Fringe is currently targeting Polygon, Optimism, and Arbitrum, and attempting to begin these efforts with a launch on zkSync.
zkSync is a leading Layer-2 scaling protocol for Ethereum that uses optimistic rollup technology to allow users to transact on the Ethereum network with faster confirmation times and lower fees. By leveraging zkSync’s scalability, we will be able to offer our users fast, cheap, and fully decentralized crypto loans with multi-chain capabilities.
Along with this integration, Fringe will also introduce other innovations to its platform, such as:
LP Token Support
Fringe Finance is breaking new ground by introducing lending backed by LP tokens, a highly underexplored area of DeFi.
Fringe’s v2 allows users to use any whitelisted LP token as collateral when borrowing assets on Fringe’s Lending Platform, offering unprecedented flexibility and access to the untapped value of Liquidity Pool tokens. Through overcollateralized loans, liquidity providers can unlock this value without closing their LP positions, giving them access to stablecoin capital to participate in other DeFi opportunities or increase their exposure to liquidity pool yields through leverage. With this, Fringe Finance enables LP providers to further optimize their yield-earning positions.
Unlike the few options currently available, Fringe’s v2 will implement this along with safety mechanisms that safeguard stability and platform solvency.
Improved Interest Rate Model
Fringe v2 introduces an improved interest rate model that maximizes the percentage of lender funds being loaned out, thereby increasing revenue for lenders and decreasing costs for borrowers. The new model targets a utilization rate of 85%, striking a balance between liquidity and yield earned on lenders’ capital.
Unlike the old model that used a hard-coded mapping between utilization rates and interest rates, the new model dynamically adjusts interest rates to incentivize lending and borrowing as necessary. Interest rates are continually reduced when the utilization rate is lower than the target and increased when it exceeds the target. The interest rate change is limited to a range of -5% and 5% per week, with a maximum change of 5% when the utilization rate is 100%. The new interest rate model enhances capital efficiency and profitability for lenders while sacrificing slightly lower liquidity.
Fringe’s v2 includes two crucial features designed to protect us against the risk of censorship posed to DeFi apps: a decentralized back-end and integration with decentralized indexing services.
The move to a decentralized back-end, motivated by increased security, makes the platform less vulnerable to attacks and improves transparency. Fringe PLP now employs The Graph and this enhancement is one of our new features to continually increase the platform’s censorship resistance.
As a follow-on after v2, we will provide an open-source, free-to-download front-end that anyone can host. This includes deploying a front-end on IPFS in the near future, which will allow multiple instances of the dApp front-end to be hosted simultaneously by independent parties. By doing so, any single actor’s attempt to deactivate any single front-end instance will be rendered powerless. Additionally, we will open-source our front-end codebase, offer grants for actors to host the front-end, and plan to deploy it via IPFS.
To mitigate the risk of backends being deactivated by cloud service providers, we will integrate with decentralized blockchain indexing services and make API endpoints open-source and accessible. This will enable us to provide our users with a more secure and reliable experience.
We are also taking steps to minimize the risk of centralized RPC providers by designing our RPC integration to be easily reconfigured in case the need arises to change RPC providers. Other solutions are being considered to further reduce the risk of centralized RPC providers.
All of these new updates come together to offer a seamless and unparalleled user experience, setting Fringe apart from the competition. Fringe’s v2 marks a new era for the platform, and the team is excited to continue innovating and pushing the boundaries of DeFi lending.
What’s next after v2?
While Fringe’s v2 is underway, there are already several follow-on items in the pipeline, which will be released during the second half of 2023. These releases are designed to further enhance the platform, boost its security, and continue to attract holders of long-tail assets to Fringe Finance.
One such item is Fringe’s Margin trading platform, which we discussed in our December 2022 update and will enable users to amplify their trades for greater potential returns. This feature is crucial for active traders who want to maximize their profits. Another upcoming release is the USB stablecoin platform, which will be released in two parts. The first release will introduce a new stablecoin-backed lending platform, offering users a reliable and secure stablecoin option. The subsequent USB releases will also strengthen the platform’s censorship resistance, ensuring it remains a trustworthy and decentralized option.
In addition to the features mentioned in our monthly update, the team is also developing a new oracle price model.
We will release a detailed description of the new price oracle model, outlining how it fits into Fringe’s new partial liquidation model and its other benefits, which include greater protection from malicious oracles and market price manipulation attacks.
We’re also introducing two additional integrations to the platform The first is pooled collateral, which allows users to pool different types of collateral assets for loans and margin positions. This results in account-level solvency health rather than position-level health and reduces the risk of a single asset’s volatility affecting any loan position’s health. Previously, each loan and trading position had a single collateral asset. With pooled collateral, because a user’s other collateral assets may increase in value while others falls in value, there is the possibility this will result in fewer liquidations. The second integration is multisig DAO wallets, which require multiple signatures to authorize transactions. This provides a higher level of security and enables more efficient management of the DAO’s resources, and allows DAOs to maintain best-practice trust-minimized operations where multiple DAO members authorize spending from the DAO treasury.
It’s worth noting that while these additional integrations will be distinct releases, they will all build on the foundation laid by Fringe’s v2. In addition, we’re currently engineering various crypto-economic enhancements that will make the platform more robust and secure.
Finally, our bootstrapping program will take place between the adoption v2 and H2 2023. This program is designed to incentivize early adopters and attract new users to the platform.
About Fringe Finance
Fringe Finance is a decentralized money market designed to unlock the capital spread in crypto assets regardless of their capitalization and supported network. With a next-generation DeFi lending & borrowing ecosystem, Fringe aims to unlock the dormant capital from traditional financial markets and all-tier cryptocurrencies.
For more information on Fringe Finance, visit our website.