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There has been considerable progress in the crypto community with the introduction of decentralized finance ( DeFi ). This has paved the way for various activities such as crypto investments and non-centralized financial services. One area of DeFi being fueled by decentralized exchanges is the lending economy.
However, this growing sector has run into fundamental issues such as less liquidity on assets, exorbitant collateralization rates, and increased difficulty in lending. If not dealt with, these flaws could pose detrimental threats to the growth of DeFi and the crypto community as a whole.
Where Piggy Finance Comes In
Interestingly, these flaws can be dealt with if the right solutions are deployed. Piggy Finance is coming out with the necessary infusions to correct these weaknesses. The project intends to provide these solutions by implementing a protocol where users can pledge their Binance tokens to get interest-free loans.
As opposed to other lending protocols, Piggy Finance functions differently since liquidity happens through the implementation of a stable pool system in place of the usual auctions. This gives the protocol the ability to efficiently use ore capital, and make available loans with very low collateral ratios.
🐷Market's volatility makes you uncertain about where to place your fund?
— PiggyFinance (@Piggy_Fi) July 2, 2021
🐷@Piggy_Fi proves greater stability is possible through its comprehensive portfolio
🐷Piggy allows for smart leveraging of $BNB to mitigate risk
Gain an advantage through Piggy:https://t.co/pf16he6pCd
Major Benefits Of Piggy Finance
There are different protocols on the Binance Smart Chain (BSC), but there is certain uniqueness about Piggy. It may interest you to know that borrowers will benefit a lot from the project because they will enjoy:
- 0% interest when they lend stablecoins. Piggy is designed to charge a one-off fee and a redemption fee.
- Users are given the ability to borrow as much as 90.9% of the value of the Binance token.
- With the PUSD pegged to the dollar, the holders of the token can contribute to the development of the ecosystem. For providing stability to the ecosystem, the PUSD holders will be given proceeds from the liquidation profits, and early adopters will get rewards, including Piggy tokens. There are several other benefits to enjoy from the project, including improved security and safety of private data among others.
Piggy Finance Model Components
Some of the core components around the Piggy protocol include:
PiggyBanks – A users account at Piggy that deploys smart contracts to monitor collateral ratios. PiggyBanks track user balances such as $BNB collateral and debt denominated in $PUSD. It is important to note that users will have to open a PiggyBank if they want to borrow.
Stability Pool & Liquidation – The stability pool is in charge of maintaining the security of the system. When PiggyBanks get liquidated, the stability pool repays the debt. Crypto users with $PUSD can make deposits to the stability pool. If the collateral ratio of any Piggybank falls below 110%, the pool will be triggered to facilitate liquidations.
Borrow – Users can borrow from Piggy by simply adding $BNB as collateral to a PiggyBank explained above. The loans taken out are then denominated in the $PUSD stablecoin. At the moment, Piggy has stated that they only have support for $BNB as collateral.
Redemption – When market prices of $PUSD fall below $1, arbitrageurs can exchange or redeem $PUSD for $BNB at a $1 face value.
Recovery Mode – A system-level security mechanism that is deployed if TCR ( total collateral ratio dips below 150%.
Piggy-nomics
$PIGGY was launched by the Piggy protocol as a secondary token. Aside from incentivizing early participants, the token captures fee revenue. Many investors are drawn to the token since they can stake their tokens to cover fees associated with loan issuances and $PUSD redemptions. $PIGGY can be earned by depositing in the stability pool, liquidity mining, contributing, and grants. The governance token has given users the ability to participate in developments and be involved in a distribution channel that is weighted towards community members.
$PUSD ( Piggy USD ) is pegged to the U.S dollar as a stablecoin. $PUSD helps the protocol control volatility associated with issuing loans backed by $BNB collateral.
PancakeSwap & Dodo
In June, two new liquidity provider pools were launched by Piggy. This was done to bring stability to the token price and provide more liquidity to the pool. The two liquidity provider pools are PIGGY/BNB and PUSD/BUSD. Users can add liquidity on PancakeSwap or Dodo to get the liquidity provider tokens needed for the process.
Summary
There are several similar projects, but Piggy stands out because it makes access to loans much more seamless for the borrower. Additionally, the fees are not exorbitant like other players in the space. There is room for improvement, but that is the case with every system in this emerging market. It will be interesting to see how large Piggy can grow and how it can capitalize in a market that is flocking to crypto due to a low-interest rate ( yield ) environment in traditional banking.