In the world of crypto lending, most protocols adopt an interest accrual model. Here, borrowers accumulate interest over the duration of their loan but aren't required to make immediate interest payments. This structure enables depositors to pull out their earned interest, sometimes pushing the utilization rate in the money market to as high as 100%. However, this can create situations where sustained low-interest payments, combined with frequent interest withdrawals by depositors, can inadvertently elevate the utilization rate. This spike in the utilization rate, in turn, can lead to increased borrowing rates in the future.
The Nolus Difference
Nolus stands out by advocating for the cash-basis approach. In this system, depositors immediately get their share as soon as borrowers settle their interest. For DeFi Leases, interest collection occurs at predetermined intervals, providing depositors with a consistent and predictable yield. If there's a delay in payments, no worries – these are automatically compensated against the borrower's ongoing DeFi Lease positions, guaranteeing protection for lenders.
Initially, Nolus is set to operate within a lending framework exclusive to stablecoins. Leveraging the widespread availability of stablecoins, this approach empowers users to effectively deploy their capital, directing it towards diverse, profitable opportunities within the Nolus ecosystem.
Revenue Streams for Lenders
- Direct Borrowers Interest: Embracing the cash-basis model, Nolus ensures that when borrowers repay their leases in cash, the lenders receive these payments directly, which then get auto-compounded by each subsequent block.
- Incentives Pool: The pool allocates NLS rewards from various revenue channels, including the protocol interest collected from borrower interest. As the Nolus dApp continuously innovates and rolls out new features, it will consistently unveil fresh revenue avenues, all aimed at enriching the experience and returns for lenders.
The ultimate goal? If lenders witness consistent and sustainable rewards on their stablecoin deposits, Nolus is strategically positioned to accumulate a significant pool of liquidity.
For every block, lenders receive stablecoin rewards as a token of appreciation for their liquidity input, and these rewards automatically compound over time. This departs from the typical accrual-based systems where lenders might have to wait for specific events to get their returns. The cash-basis approach guarantees rewards in real time. If the utilization rate surpasses a set limit, the system temporarily stops new deposits to maintain stability and resource equilibrium.