Defiqa intends to be the first truly crypto-collateralized lending and borrowing platform. While other platforms peg the price of collateralized capital to their USD values, Defiqa will be pegged directly to tokens themselves. Users will be able to mint synthetic assets equivalent to a percentage of the base token. For example, if a user contributes 20 DFI tokens, they will receive anywhere from 15-90% of the contributed capital, depending on two factors;
The price volatility of the underlying asset
Global rules passed down by DFI Governance
In the most stable assets (in this example, DFI), a user will be able to mint 19 DFI tokens, with each syndfi being backed by the underlying.
Collateralization Rates
In short, Defiqa will have no variable collateralization levels dependent on USD price, liquidations, or otherwise. Once a user mints an amount of synthetic tokens, they will open up a position in the Defiqa user interface that allows for the redemption of that position by repaying back the amount of minted dfiTokens. This allows for two things;
Users will never have to worry about liquidations or upkeep of collateral as their position will remain open and.;
Users can maintain full exposure to their underlying positions while also making use of their free capital with no risk of loss
In up trending markets, collateralization levels are usually not an issue for other lending platforms - when tokens devalue in USD price however, positions get liquidated and users can experience heavy draw downs. Defiqa ’s dfiTokens will be the superior option in both cases, as with uptrending markets they will never have to pay an upkeep rate (as there are no lenders supplying their capital) and in downtrending markets, their positions will remain open until the requisite amount of dfiTokens have been repaid into the contract.
As mentioned earlier, there are no interest rates for keeping positions open through Defiqa . Users are incentivized and encouraged to maintain open positions as long as they’d like, while eventually returning to their original holdings when they deem fit. The second benefit of positions remaining constant is that Ethereum network slowdowns are never an issue - there is never a rush to exit an open position in fear of liquidation, and this gives ease of mind back to the user, while also avoiding the oft-seen gas wars during times of high volatility.
One of the key limitations of existing protocols is their adherence to USD pegs, reducing their ability to integrate new tokens and limiting the overall potential of the ecosystem. Defiqa’s design will allow users to mint ANY token existing on the Ethereum network, thereby increasing the total deployable capital by several magnitudes. While platforms such as AAVE and Compound support a few dozen currencies, Defiqa can support hundreds. As part of our rollout plan, Defiqa will initially only enable the minting of syndfi , however this will quickly ramp up over time.
As seen in our innovations with Defiqa and other products, simplicity for the user is at the core design philosophy at dfi . The concept of maintaining collateral, variable debt rates, and so on, is simply far too confusing and oftentimes misleading new users, causing a large barrier to entry into DeFi and preventing billions of capital from entering the system.
Through Defiqas synTokens, we present an option for traders that is risk-free, interest free, and elegant to use.
At the heart of Defiqa will be the DFI Token. Both upon minting and redemption of synTokens, there will be a small percentage fee paid out that is split among stakers of the DFI governance pool, the treasury, and the Defiqa fund. Through this system, Defiqa will generate profit from all actions on the system, promoting the use of Defiqa itself, rather than bringing users to the platform and hoping for their liquidations.
Additionally, it will provide Defiqa with additional revenue that will ultimately result in larger profits being siphoned back to the governance vault.
synTokens will be redeemable by anyone on the network who purchases them for the percentage value as judged by the DFI governance and in accordance with the risk level of the chosen asset. In the synDFI example, any user will be able to purchase 19 synDFI and redeem them for 19 DFI tokens - however, only the user who opened the original minting contract will be able to redeem these 19 synDFI tokens for the full 20 DFI position. It is through this system that real value is attributed to tokens and efficient markets will arise.
Holders of the underlying tokens backing the synthetics can also further capitalize on their holdings by DPing in the synthetic pools and generating trading fees from users switching between the synthetic asset and the underlying asset. This will generate significant volume and liquidity for Defiqa , generating heightened trading fees for the governance vault, and further adding to the feedback loop that is directing value to the DFItoken.