DeFi: DeFi (Decentralized Finance) usually refers to blockchain-based decentralized application (DApp) and decentralized exchange. It enables decentralization of the payment process, without relying on centralized financial intermediaries. For example, a third-party financial institution often charges a fee as payment during money transfer, whereas in DeFi applications, money can be sent directly to the designated wallet without any intermediary and their respective fees. Therefore, DeFi technology is mostly used in payment and lending cases.
Liquidity Mining: Liquidity Mining is a DeFi mechanism in which participants can provide liquidity for a DeFi project by depositing or lending specified tokens as required by the project and being rewarded with tokens or the right to govern the project.
Capital Liquidity: Liquidity has a significance in an economic . The DeFi industry with the liquidity mining mechanism, can incentivize users to provide liquidity and give the required headstart to the project. Therefore, liquidity mining can be considered as the soul in the DeFi sector.
Lending & Single-Asset Vault: Gate.io’s Lending & Single-Asset Vault (also known as Lending & Liquidity Mining) is one of the types of liquidity mining. Gate.io has gone live with single-asset lending & liquidity pools where users can earn revenues by depositing tokens to provide liquidity. Users can deposit or withdraw at any given time.
II. What is Lending & Single-Asset Vault
DEX and crypto lending are two of the most fundamentally important aspects for the development of the DeFi eco. With lending, an asset can show its time value through growing interest. In 2020, crypto lending and its derivative liquidity mining directly triggered the "DeFi Summer".
From the perspective of usage, cryptocurrency lending is similar to traditional banks where the users deposit money into a bank or liquidity pool and then lend money to the borrowers. The difference is that in traditional financial lending, the bank needs to act as a broker or intermediary, while in DeFi lending, there is no intermediary for the deposit and loan. The transactions are directly made between traders which are uted by smart contracts. In addition, compared to traditional bank lending where the borrowing rate is fixed, the loan interest rate in DeFi varies according to the demand and supply of currencies, generally with higher interest rates for deposits and lower interest rates for loans.
Unlike previous peer-to-peer lending, the new DeFi lending allows users to not negotiate information such as interest rate, term, and collateral. The smart contract will aggregate users' token deposits, determine the interest rate using algorithms based on the supply and demand in the market, and then lend tokens based on the borrower's collateral assets. This model can be regarded as "lending is mining". With various types of liquidity mining and yield farming projects emerging, the whole DeFi sector has flourished. However, considering the fact that most DeFi projects have not undergone reliable security audits, there is an array of security issues that is still a concern. In addition, due to the current high gas fees on Ethereum, users with small investments also face a high threshold when participating in DeFi lending & mining.
To meet users’ investment needs and provide them with safer and more flexible investing options, Gate.io has launched a new feature called “Lending & Single-Asset Vault” (also known as “Lending & Liquidity Mining”) which allows users to earn income by depositing tokens to provide liquidity. Lending & Single-Asset Vault is all about pledging one asset to lend another or pledging an idle currency to lend a portion of another currency to earn more income.
When various assets are deposited into Gate.io’s Lending & Single-Asset Vault, lending pools for these assets will be generated, such as BTC lending pool and ETH lending pool. Thereafter, the will calculate loan and deposit rates in real time based on the supply and demand of currency in each liquidity market. Specifically, when the lending ratio of a pool is high and the remaining liquidity is insufficient, the interest rate will rise to encourage users to deposit. And when the pool lending ratio is low and the remaining liquidity is abundant, the interest rate will fall to encourage users to borrow.
III. Advantages of Gate.io’s Lending & Single-Asset Vault
Featuring decentralization and high yield in DeFi projects, Gate.io Lending & Single-Asset Vault enjoys the security and convenience characteristics in CEX.
Users who directly participate in the DeFi mining may experience a cumbersome process that requires them to manage wallets and their private keys as well as to pay high gas fees. In addition, it’s necessary for users to accurately identify projects to avoid code vulnerabilities and project bankruptcy. That is extremely risky. In contrast, participation in Gate.io Lending & Single-Asset Vault has the following advantages.
1. Security and Reliability
The Gate.io platform, which has always taken security as the core of its services, is more trustworthy than any other DeFi projects which are frequently attacked every other day. Gate.io has been ranked second in terms of security by a third-party security testing laboratory that has tested the security of 100 cryptocurrency exchanges around the world. Relying on a highly secure platform for lending and liquidity mining, investors can effectively avoid project risks.
2. Convenience and Speed
When investing in lending & mining in decentralized projects, investors often need to learn more about them and perform complicated tasks and if something goes wrong in the operation process, there is the risk of not being able to retrieve funds from the contract address. With Gate.io’s Lending & Liquidity Mining, you can become a liquidity provider and earn gains in just a few simple steps. What’s more, the principal and yields can be withdrawn at any time.
3. High Revenue
Gate.io Lending and Liquidity Mining aims at higher returns and calculates the interest rate based on algorithms. The recent project with high yields will be mentioned in the relevant announcement on a daily basis.
4. Wide Range of Tokens Types
Since its inception, Gate.io has launched more than 1,000 trading pairs, making it the world's largest exchange for crypto coins. It was recently ranked #1 for Altcoins by Coin Clarity and was called an “Altcoin Hunter’s Dream”. Gate.io offers a wider variety of coin pairs for users to pick and choose from based on their positions. Gate.io offers users with many lending pools. So far Gate.io has launched 347 single-asset lending liquidity pools, and more pools are being added daily. Users can choose according to their positions.
IV. Quick-Fire Questions on Gate.io’s Lending & Single-Asset Vault
Q: What’s the source of revenues?
A: The liquidity added by users (depositor) to the lending pool will be aggregated by the and lent to the borrower. The interest paid by the borrower will become the revenue of the depositor in proportion to the liquidity share.
Q: How is the rate of return determined?
A: The return rate is calculated by the based on the latest lending data of the corresponding token pool.
Q: Are there any requirements for adding liquidity?
A: There is different minimum liquidity to be added in different lending pools. For specific requirements, please click “Add Liquidity” on the Lending & Liquidity Mining section.
Q: What is the difference between Gate.io Lending & Single-Asset Vault and Gate.io Liquidity Mining?
A: Liquidity mining involves two coins, and users earn income from transaction fees and incentives. Lending & Single-Asset Vault involves a single coin, and users earn from lending interest and do not bear the risk of impermanent losses.
Q：What is the difference between Gate.io Lending & Single-Asset Vault and DeFi Lending?
A: DeFi mining is more risky, with a higher threshold for participants, and users are required to manage wallets on their own. While Gate.io Lending & Single-Asset Vault is less risky, and gas fee is not needed. Users can participate with their Gate.io accounts.