Optim Labs is excited to announce our latest strategic partnership with Liqwid Finance, a decentralized peer-to-pool lending and borrowing protocol on Cardano. DeFi money markets are one of the core pillars of a healthy blockchain ecosystem, and the talented team at Liqwid has been hard at work for the past year building this critical DeFi primitive to bring more powerful and complex capabilities on-chain.
With Cardano’s approaching Hard Fork Combinator event, Liqwid Finance is well positioned to be one of the first protocols to take advantage of long awaited Vasil features, Plutus and ledger improvements. This upgrade will finally unleash the next wave of DeFi products on Cardano. Optim Finance builds innovative yield products and aggregation infrastructure for Cardano DeFi. We are a committed partner in not only building infrastructure and primitives for other protocols to build upon, but also develop products to facilitate and enhance the average user’s DeFi experience to increase adoption.
Supported Collateral Assets
Liqwid and Optim are working together to onboard Liquidity Bonds as collateral in Liqwid money markets. Users will be able to borrow against their active bond positions in the ADA lending market (represented on-chain as Bond CNTs). This will enable greater capital efficiency in the Cardano DeFi ecosystem as well as greater liquidity for Optim’s Bond purchasers.
For Liqwid, Bond collateral will create stronger demand for ADA borrowing within the Liqwid protocol. Given that the collateral and borrowed assets are essentially the same, as all Bonds are always redeemable for 100 ADA face value, liquidation risks due to price movement are minimized.
Optim’s Liquidity Bond market is nearing completion and will soon be live on mainnet. Simply put, Liquidity Bonds allow for anyone to lend and borrow ADA staking rights. https://optim-labs.medium.com/liquidity-bonds-simplified-43ae62c1e6df
It is important to note that all bonds, at their core, are the same. Every Bond Token has a face value of 100 ADA. Meaning every Bond Token can be redeemed for 100 ADA + accrued interest within a predefined time window in the future. The 100 ADA of each bond token represents the 100 ADA of staking rights that have been lent to a borrower.
Different ‘types’ of bonds — SPO, IBO, ISO, etc. — all simply refer to different borrowers (use cases) and the likely duration, interest type, and interest rate a lender will see from these borrowers.
At launch, SPO Liquidity Bonds will allow small Stake Pool Operators to borrow 1 million ADA of stake delegation to grow their pools.At the same time, anyone with at least 100 ADA can participate in these bonds as a lender, earning an interest on your $ADA and being able to use the Bond Tokens obtained as collateral on Liqwid. This will enable consistent block production to provide competitive staking rewards and prove operational proficiency. This reduces barriers to organically growing delegation, a problem that has plagued the ecosystem with growing numbers of small stake pools retiring due to being unable to jump-start delegation.
Optim’s vaults, our second product after liquidity bonds, can be leveraged to abstract away the complexity and reduce the barriers to entry for the average user in Cardano DeFi. Optim’s Strategy Vaults will allow users to subscribe to specific trading or yield accruing strategies to be executed by depositing their funds into respective vaults and letting the smart contracts automate interactions.
There are a number of Vault designs being explored for integration with Liqwid that will result in optimized yield for users and improved functionality of the Liqwid protocol. Vault strategies being explored include pooled capital used to benefit from performing loan liquidations on Liqwid (Keepers Vault) and using Liqwid Lending Pools to obtain the highest returns for lending $ADA or Stablecoins.
Decentralized governance has always been a priority for Optim Finance. As a DeFi protocol, allowing users to determine the direction and vision of the protocol on-chain is important. On top of developing a leading DeFi protocol on Cardano, Liqwid has also pioneered development of the Agora DAO infrastructure to enable projects to adopt decentralized governance faster and with fewer resources. With Agora being the current leader in DAO infrastructure, Optim is exploring it for adoption of its DAO needs.