Lendroid (LST) Overview | Decentralized Margin Trading Protocol

luisramalho (29)in #lendroid • 7 years ago

Lendroid is a trustless, open, peer-to-peer digital asset lending platform based on the Ethereum blockchain. They have the objective of creating a loan marketplace where borrowers can raise funds at fair interest rates and enable lenders to earn a fair and continuous returns on the funds they are willing to lend. Basically, Lendroid wants to enable lending and margin trading for decentralized exchanges. Therefore, bringing together lenders, borrowers and guarantors. So let’s see how this works:

Borrower

A ‘borrower’ can collateralize a digital asset, to borrow another digital asset from lenders, for a short period. At the end of the loan period, the borrower
has the option to extend the loan by adjusting the collateral locked or repay the loan along with the accrued interest — or they stand to lose their collateral.

Guarantor

Guarantors can choose to guarantee loans issued by one or more markets, they believe will remain solvent, by locking up LSTs which act as secondary collateral for a loan.

LSTs are the native token of the Lendroid protocol, it stands for Lendroid Support Token. The use case for this tokens is that in order to participate on the protocol you must have LSTs. If you don’t have, the platform incentivizes you to earn LSTs by engaging in activities that contribute to the health of the ecosystem.

They go further in the whitepaper discussing in detail the utility of this token. However, in summary there are four players on the protocol, two of which provide utility — the Relayers and the Wranglers, and two others who avail of these utilities and participate to maximize profits — the Lenders and the Borrowers (or Margin Traders).

Lenders and borrowers are easy to understand, but what are the Wranglers and Relayers?

Wrangler

The Wrangler is an entity that was conceptualized for the Lendroid ecosystem. This is one of two incentivized actors within the protocol, and their role is to monitoring the Margin Accounts, a computationally intensive role. By monitoring and ‘Wrangling’ terminal accounts, the Wrangler maintains the general health of the ecosystem, while also protecting the interests of the Lenders. From the creation of a Margin Account, to every state change in position, adding of collateral, right until the account is liquidated, the Wrangler keeps tabs on each development. Whenever there is a change in state, the Wrangler notifies the Smart Contract System, which then triggers an Oracle call and subsequently checks the margin level of the account.

Relayers

The Relayers allow the Lenders to contribute their offers to the lending pool through them. Then, they match the offers with appropriate traders. The traders can then use the borrowed funds to margin trade, make a profit, and repay the lenders.

It is not so straightforward to understand these concepts, and I do recommend that you go through the whitepaper in order to have a better idea of what they are trying to accomplish.

A few words of warning though. If you want to be a guarantor or lender, you are expected to understand the financial risks that you expose yourself to by participating in the loan markets.

They are clear in their whitepaper stating that the Lendroid platform does not guarantee profits for lenders or guarantors, and expects you to perform your due diligence before deciding to yourself involved in any market.

So, in summary Lendroid is

Non Custodial — Smart contracts mean there is no 3rd party custodian. With Lendroid there is no risk of the custodian getting hacked while lending or margin trading.

Works Across Exchanges — Lendroid powers a common protocol and a shared liquidity pool for margin trading across various decentralized and centralized exchanges.

and Non Rent-Seeking — The protocol is non-partisan and does not favour one type of participant over another. The fee is paid by actors using the protocol to those helping the protocol.

Thus, Lendroid aims to solve the shortcomings of centralized exchanges by creating a global shared lending pool, and a symbiotic off-chain infrastructure supported by incentivized participants — the Relayers and Wranglers.

If you want to read further, these are the links to their whitepaper and website: