For the unbanked 1.7 billion people in the world, the credit market in traditional finance is inaccessible. But decentralized lending attempts to resolve this problem and allow anyone anywhere to secure loans.
While the first generation of decentralized lending protocols like Aave and Maker didn't need a bank account or the tedious credit checks to take a loan, they did require over-collateralization. However, underbanked or unbanked users likely cannot afford the necessary crypto collateral.
This is where alternative avenues of uncollateralized crypto loans enter the scene. Protocols in the crypto space have been trying to achieve undercollateralized lending since 2017. That said, it's still a nascent sector featuring flash loans, third-party risk assessment, off-chain credit integration, crypto native credit scores, personal network bootstrap, real-world asset loans, digital asset loans, and NFTs as collateral.
Undercollateralized lending is expected to lead the next wave of DeFi adoption. PAXO Finance, an instant, permissionless, undercollateralized DeFi lending protocol, aims to be at the forefront of this growth cycle and kickstart the DeFi 2.0.
Incentivized Testnet Program
PAXO Finance is a decentralized Investment loan protocol built for the next billion DeFi users. It works like borrowing money to purchase a home or investment property. You borrow money to invest in crypto-assets, and the funds are secured against this portfolio of digital assets. Your portfolio is locked in the smart contract.
The decentralized money market protocol basically allows users to invest in digital assets through multi-pool borrowing while offering attractive interest rates for lenders, low transaction fees for high yield, and balanced profit and risk. Additionally, it boasts one of the lowest loan-to-collateral ratios in the industry, ranging from 20% to 100%.
Recently, PAXO launched an incentivized testnet program on Polygon. Under this program, which is currently running until late June, the team will give away 200,000 PAXO tokens.
The program, which is freely accessible to all users, aims to get as many users as possible to test the protocol and submit their feedback. Through user feedback, the team will refine PAXO Finance's core product offering, which will shape the project's roadmap.
To ensure user safety, PAXO Finance audited its smart contracts by reputable blockchain security firm QuillHash.
Feature-rich Platform
As a firm believer in decentralization, automation, and financial inclusion, PAXO has built an open protocol where anyone and everyone can borrow money without credit checks, KYC, or social enforcement. One just needs a crypto asset.
Paxo finance will also offer staking and farming opportunities to lenders and borrowers to earn while holding the tokens.
Additionally, the protocol offers an attractive, flexible loan repayment schedule to cater to all kinds of users who can even customize their payment time frames. PAXO puts the deployed capital in partner collateralized lending pools such as AAVE or MakerDAO when not used.
For traders, PAXO can be beneficial as it allows them to take bigger loans on rallying markets for profit maximization and the ability to borrow to execute asset accumulation strategies during bearish markets.
Its tailored isolated pools make sure that a lender can invest in multiple pools to meet their investment goals. These pools support digital assets like WBTC, BTC, and MATIC as collateral. There is also a PAXO portfolio builder for ambitious users with a crypto investment target to meet in a given period.
The Token
The native cryptocurrency of the protocol is PAXO, which is a governance token controlling interest rate, changes in the protocol, development roadmap, inclusion of new assets, reward distribution, and other functions.
Taking inspiration from Compound protocol, PAXO will only allow token holders to vote on the protocol's features and not on the operation and management of the company or their assets or select the board of directors of these entities.
Besides governing the protocol, PAXO also functions as a utility token, and economic incentives will be distributed to encourage users to put efforts towards contribution and participation in the ecosystem.
Additional PAXO tokens will also be awarded to users based on their actual usage, activity, and efforts made on the protocol.
Out of the total supply of 500 million PAXO, the team has allocated 15% of the supply for this adoption and incentivization. Another 15% is for the team and marketing each. The most significant portion, 20.7%, however, is allocated to reserve, while 10% of the supply will be used for development. Meanwhile, 12% is set aside for three rounds of private funding, and 1.80% is raised from the public via IDO.
Earlier this year, the stealth-mode startup raised $1 million of funding from Zebpay, Lemon Grass Fund, Avinash Shekhar & Raj Karkara from Zebpay, Mithil Thakore from TeraSurge, Rajat Gahlot from QuillHash Technologies, and other angel investors.
So far, PAXO Finance has completed the UI & testing, Lightpaper release, audit, and testnet deployment part of its roadmap.
This quarter, the company is preparing for its mainnet launch, getting its token listed on several exchanges, and beginning the development of multiple isolated pools. Before 2022 is over, the team is aiming to achieve multi-chain support, additional supply markets, the addition of an NFT pool, and initiating governance to maintain and control the protocol.
Final Word
DeFi currently does not have a permissionless and tailored solution for cryptocurrency investment. PAXO Finance wants to offer a decentralized solution that can accelerate the growth of DeFi further. According to PAXO, the availability of undercollateralized Investment loans could draw millions of new users into the space due to high demand.
The protocol provides a trustless, decentralized money market platform secured by smart contracts that open up investment loan options in DeFi for global users to invest in digital assets via multi-pool borrowing.
Users can seamlessly hold new assets without selling or rearranging a portfolio, borrow and buy new crypto assets with minimal collateral, borrow to buy tokenized assets like stocks or properties, and stake and farm with the invested assets.
* This is a contributed article and this content does not necessarily represent the views of techtimes.com
