The entire concept of a decentralized blockchain is to make online trading convenient and secure. For people new to cryptocurrency, you might have frequently come across the terms Bitcoin, Ethereum, Cardano, etc. These are examples of famous decentralized exchanges. Solana is another famous decentralized exchange with high utility. In this blog, we will explore Port Finance, a non-custodial lending protocol hosted by Solana.
As mentioned above, Solana is one of the many decentralized exchanges in the market. It is known to be the fastest growing blockchain worldwide, with a rapidly growing ecosystem in cryptocurrency. Its projects range from Decentralized Finance (DeFi) to NFTs (Non-Fungible Tokens). As the name suggests, decentralized finance aims to remove intermediaries in the process of online transactions. For laymen, NFTs are Non-Fungible tokens that people often use to safeguard their digital assets from copyright infringement.
Solana supports smart contract functionality, and its native cryptocurrency is SOL.
So as we learned that the ecosystem of Solana is vast and rapidly growing, let us know about one of the famous components of the Solana ecosystem, Port Finance. It is essentially a money market within the ecosystem that aims to improve the speed of the Solana blockchain and provide competitive lending facilities to its customers.
If you assume yourself in the place of a lender who wants to conduct transactions across an online lending platform, what factors would you consider significant? The traders out there might have already thought about several parameters, but for the ones who are clueless about what can be done, you could take care of the following factors:
And the list can go on depending on the number of transactions and how experienced you are with carrying out transactions on online platforms.
Let us consider these factors from Solana's viewpoint and why the platform is one of the best in the DeFi world.
Port Finance provides many features that make lending and borrowing convenient for users. Some of them are a variable rate lending feature, provision of flash loans, interest rate swaps, fixed-rate lending, its native PORT token to facilitate decentralized community governance, etc.
One of their unique features is that they allow their customers to utilize multiple collateral types and deposit various assets and stablecoins to make one collateralized position. Initially, the customers can invest in USDT, SOL, PAL, SRM, and USDC as collateral forms. These resources can later be combined on the Port Finance Platform to define the individual user's borrowing power.
The Platform’s interest rates are calculated based on the total borrowed amount of assets divided by the total liquidity provided by the depositors and lenders. Following this, a predefined curve is utilized to determine the interest rates. Asset price volatility is one of the crucial determinants in deciding the interest rate. More volatile assets will show more variation in interest rates. Stable assets like USDC, PAI, and USDT show lesser fluctuations with the interest rate.
Port Finance utilizes third-party liquidations to maintain an overall healthy protocol. This implies that the users are allowed to search for defaulted loans that they can liquidate and provide the necessary collateral after that to cover the debt. This process, in turn, facilitates the restoration of funds to the platform creating a win-win situation for both parties.
Port Finance also supports a Flash Loan functionality that enables users to borrow and return the liquidity to the pool in one transaction block. Under this condition, the users need not provide collateral to the platform, making it a hassle-free transaction.
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