The prototype of "decentralized bank" launched by HopeLend

The long-silent DeFi lending market was broken by MakerDAO. On August 6th, it dropped a "king bomb" to the market, announcing that it would increase the deposit rate of DAI to 8%. As soon as the news came out, a large number of giant whales were stimulated to come to deposit. In less than a week, the supply of DAI increased by nearly $1 billion.

Before the launch of Spark Protocol, MakerDAO had little control over the application and incentives of DAI. After introducing the lending suite, MakerDAO broke the rules of the game. With this new product, DAI’s share in the stablecoin market was protected and enhanced.

It is foreseeable that in the future, more and more DeFi products will break through the established rules and embark on the road of horizontal expansion, using lending, LSDFi, stable currency and other packages to increase the market share of the agreement. Hope.money, a new stablecoin project, is one of the pioneers.

Not long ago, Hope.money launched HopeLend, a lending protocol, which brought native revenue scenarios to the project, improved the efficiency of user funds, and promoted the project to enter the mainstream stablecoin market. In the future, the project will also launch HopeConnect, a custody and settlement platform, and HopeEcho, a synthetic asset that tracks RWA, and eventually become a "decentralized bank" that connects DeFi and CeFi.

Therefore, HopeLend plays a very critical role in the entire system of Hope.money. It is its existence that makes the prototype of Hope.money, a "decentralized bank", take shape. Specifically, how does HopeLend work? How will it affect the whole system? In the following, while dismantling HopeLend's underlying mechanism, we will analyze its impact on Hope.money's token mechanism and ecological development from a global perspective. We hope that these analyzes can bring some new thinking to users and other projects .

1. The Germination and Mission of HopeLend

Looking back, the idea of Hope.money actually came from 2019, when Flex Yang, who was the CEO of PayPal Finance at the time, came up with the idea of creating a new distributed stable currency, wanting it to serve the entire industry and promote the entire cryptocurrency and financial ecology develop. Due to limited energy, this ideal was delayed for several years.

It wasn’t until after sorting out PayPal’s reorganization that Flex Yang discovered that the industry urgently needed a stablecoin that could balance “stability, decentralization, and capital efficiency,” that was the story behind HOPE and Hope.money.

Unlike ordinary stablecoins, the price of HOPE is not directly pegged to the U.S. dollar, but is related to the price of BTC and ETH—every time a HOPE is generated, a certain amount of BTC and ETH needs to be reserved correspondingly to set a preliminary anchor After the price, HOPE will fluctuate with the fluctuation of the reserve until the price of HOPE reaches $1.

Therefore, until the price stabilizes, "volatility" will always follow HOPE. This is also the implication of the project Logo: there is an invention in Hungary called "Gumbutz", which is a man-made object with only two balance points, derived from a tortoise, you throw it on the ground or into the air, and it will eventually recover to the form of the Logo. This process from fluctuation to stability is also the state of HOPE in reality.

The long-term vision of Hope.money is to become an excellent collateral that can be applied to various affairs in the encryption market and even the international trade market. This requires HOPE to have high liquidity and have an exchange rate and interest rate market-this has given birth to HopeSwap and HopeLend, the former is responsible for the transfer of space value, and the latter provides native income functions.

As a decentralized non-custodial lending protocol, HopeLend is the second protocol launched by the HOPE ecosystem, and it has been launched on the mainnet not long ago. With a very competitive interest rate level, it has attracted many new and old DeFi users to participate.

Different from the credit system of traditional finance, the operation of HopeLend relies on automated smart contracts and liquidity pools, which eliminates the cumbersome paper contracts and manual intervention in traditional finance, improves the accuracy and efficiency of execution, and makes lending more efficient and flexible. This has laid the foundation for Hope.money to become a "decentralized bank", bringing more flexible choices and high-quality opportunities to users, and at the same time helping HOPE to be more widely used in the encryption market. Let's take a closer look at HopeLend and see how it will work and benefit the entire Hope.money system.

2. Disassemble the underlying mechanism of HopeLend

1 The operating structure of HopeLend

The basic operation process of HopeLend is basically the same as the mature DeFi lending agreement. HopeLend can realize instant loans according to the status of the fund pool without the need for separate matching between the two parties. There are three main roles here:

(1) Depositors, providing liquidity to obtain passive income.

Currently supports the deposit of 8 assets including ETH, USDC, USDT, HOPE, stHOPE, WBTC, WETH, and wstETH.

(2) The borrower borrows money by way of overcollateralization.

The maximum amount borrowed depends on the value of the mortgaged asset, LTV (collateralization coefficient), current available liquidity and borrowing limit, while the interest rate depends on the borrowing rate derived from the asset supply and demand ratio. Currently supports the lending of seven assets including ETH, USDC, USDT, HOPE, stHOPE, WBTC, and wstETH.

(3) The liquidator, who repays part of the debt owed and receives discounted collateral in return.

Anyone can be a liquidator of a debt. It should be noted that HopeLend has set up a risk control line of defense for this purpose - once the money after liquidation cannot cover the loan, then the treasury funds will make up for this part of the loss, or initiate an ecological-level proposal to use ecological funds for risk subsidies , to protect the rights and interests of depositors.

2 HopeLend's lending model

(1) E-Mode: Improving capital efficiency

E-Mode mode, also known as "efficient mode", is designed to maximize capital efficiency. Just like labeling commodities with different categories, prices, and qualities, mortgaged assets will also be classified. In E-Mode mode, only similar assets can be borrowed (for example, stablecoins can only be borrowed from stablecoins).

Compared with the normal mode, the E-Mode mode enables the borrower to have access to more assets. For example, in the figure below, in the non-E-Mode mode, the mortgage coefficient of USDC is only 75%, but in the E-Mode mode, the mortgage of USDC can reach 97%.

(2) Isolation mode: taking into account both efficiency and security

The effect of this model is to maintain the security of the HopeLend protocol while listing more assets as collateral.

The assets listed in this model are isolated from the liquidity of the main assets, and the assets labeled as isolation will have a limit on the borrowing limit, and only specific assets can be lent. At the same time, other assets in the wallet cannot be used as collateral for borrowing.

(3) Flash loan: the king of efficiency

In DeFi lending, flash loans are a sharp weapon. It allows loans to be obtained without collateral assets, and borrowers only need to repay the borrowed assets and handling fees in the same transaction block.

This model greatly improves capital efficiency and is often used as arbitrage. For example, when there is a difference in price of a uniform asset on different platforms, you can first borrow a flash loan, buy it on a DEX with a low price, sell it on a platform with a high price, and finally repay the loan and pay the handling fee on the flash loan platform. Flash loans are also often used for collateral liquidation, through which the liquidator repays debts to obtain liquidation rewards.

3. Economic model of HopeLend

4. Basic situation of token

During the operation of HopeLend, hToken and dToken will be generated, among which:

hToken represents HopeLend token. When the funds are deposited, the depositor will receive a corresponding number of derivative Tokens, that is, hTokens, which are mapped to the underlying assets 1:1. Owning hToken is equivalent to holding the ownership and income rights of the deposited assets at the same time .

dToken represents a debt token. The value of dToken is linked 1:1 to the value of the underlying borrowed asset, representing the debt owed by the holder. It is minted and destroyed when borrowing and repaying.

In addition, the entire HOPE token system mainly has four types: HOPE, stHOPE, LT and veLT, among which stHOPE is the pledge token of HOPE, and veLT is the LT locked by voting. Their production methods and utility are shown in the figure below:

2. Token circulation system and value

(1) Stablecoin HOPE

HOPE is the native pricing token of the ecosystem. As mentioned above, HOPE is supported by BTC and ETH reserves in the early stage of development. The initial price is set at $0.5. During the price discovery period, the price will change with the fluctuation of the reserve , until it reaches $1 and the total reserve value reaches a certain multiple of HOPE, HOPE will be officially declared as an over-collateralized stablecoin.

Therefore, different from common stablecoins, HOPE incorporates the concept of options in traditional finance - holding 1 HOPE = holding equivalent BTC and ETH + stablecoin options with an exercise price of $1. This not only improves the efficiency of the use of funds, but also captures the beta benefits brought about by the rise of BTC/ETH.

(2) LT and veLT

LT is the incentive and governance token of the ecosystem, and users can obtain LT rewards by holding stHOPE. If you want to participate in HOPE ecological governance, you need to pledge LT to obtain veLT. The specific amount depends on the number of LT participating in the pledge and the duration of the pledge.

On the one hand, veLT holders can get bonus bonuses; on the other hand, because the longer and more LT is locked, the more voting rights they have, which means that LT has the value of bribery, and in the mature stage of ecological development More bonus rewards will be received for "HOPE War".

3. How to use HopeLend?

With HopeLend, LT has gained new application scenarios, and users have various sources of benefits.

All HopeLend participants will have the opportunity to obtain LT by interacting with the agreement, and the specific interest rate depends on the supply and demand of funds in the lending market. Here, collateral can also generate additional incentives. For example, the current interest rate for borrowing USDC is 2.93%, while the APR for rewarding LT is 37.45% (will change over time), and there is obvious room for profit.

In addition, users can also use HopeLend to arbitrage. For example, the current borrowing rate of USDT is 2.54%, and the deposit rate of HOPE is 2.9%. Users can choose to deposit HOPE and borrow USDT as collateral to reap the interest rate difference and LT rewards. Of course, if you are a deep DeFi player, you can also arbitrage through flash loans, collateral price differences on different platforms, etc., to maximize the utilization of funds.

4. HopeLend, infinitely helps Hope.money

It can be seen from the above that the HopeLend protocol is set through a series of mechanisms to ensure the security of the protocol and at the same time meet the deep-level user needs. More importantly, just like the Spark Protocol to MakerDAO, its existence will benefit the entire Hope. The money system provides a growth engine in terms of application scenarios, capturing liquidity, and empowering token value.

The innovative model brought by Hope.money is very inspiring. It prompts people to think about how to balance security, stability, and capital utilization when designing stablecoins. HOPE shows different states according to the development of different periods. In the early stage of the project, it is more inclined to capital efficiency; in the mature stage, it is more inclined to stability. It uses time to exchange space and leverages the potential energy of the market cycle to allow HOPE to quickly break through the crowded stablecoin track and become a large-scale and widely used stablecoin.

Today, Hope.money has integrated stablecoins, transactions, and loans. In the future, it will continue to expand horizontally. It will launch the decentralized custody and clearing and settlement agreement HopeConnect, and connect DeFi and CeFi to make clearing and settlement on both sides more efficient and simple. , Smooth, in the collision of the centralized and decentralized world, users also enjoy more high-quality financial services.

Innovation also means facing unusual challenges. The current HOPE is in the early stage of development, and whether it can win the competition in the stable currency market remains to be tested by the market. Any innovation is not achieved at one touch. Hope.money needs time to weave that grand vision, and looks forward to its own bright moment when the market winds up.