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Introducing DeFi 2.0
Industry leading R&D
Token Distribution Event
Protocol Overview
The Minterest protocol is a sophisticated application of inter-related smart contracts which enable a variety of token assets to be lent or borrowed by users, with it dynamically computing interest rate in real time, based on the proportions of lent and borrowed assets.
At its core, the Minterest protocol enables the creation of token markets with pools of varying token assets, where interest rates are algorithmically determined, and the interest rate is managed via the interplay of lender supply and borrowing demand.
Unlike direct P2P lending, borrowers and lenders of a token asset interact with the protocol’s underlying asset pools, earning and paying dynamic interest based on demand and supply dynamics, similar to traditional forex markets, but without requiring a trusted third-party mediator as in most legacy financial services.
Given the decentralised nature of the protocol, each token market contains a public, transparent, and non-violable ledger which records each transaction and its applicable interest rates.
One of the key innovations in the Minterest protocol is that the solvency of under-collateralized borrower positions is managed through auto-liquidation processes, where the protocol itself acts as a liquidator and ensures the solvency of each underlying asset pool.
To incentivize and reward user participation, the protocol issues a governance token (MNT), with each MNT representing voting rights on a 1 for 1 basis. MNT token holders may utilize them to vote on governance proposals, and so determine future developments of the protocol and its ongoing operational parameters.
To incentivise participation in governance, the protocol swaps any token surplus it accumulates through its various value capture mechanisms for MNT tokens. It distributes these MNT tokens to users of the protocol who elect to stake their MNT tokens and participate in its governance processes by voting on the protocol’s governance proposals.
Brief from Josh, CEO at Minterest.
Technology Stack
04.22 UPDATE: Due to significant market support to prioritise Ethereum as the protocol’s launch network, we are launching on Ethereum first. We will launch on Moonbeam and other EVM compatible networks later, as part of the protocol’s multi-chain roadmap.
Minterest is prioritising the Ethereum launch because it still remains the dominant smart contract platform for developers, with some of the key benefits being:
- More secure
- More familiar and a larger community
- More sustainable
- High TVL and liquidity
Last year, the protocol’s underlying technology stack was redesigned, switching from Substrate to Solidity. This provided the protocol with the greatest possible flexibility in its launch options, and by doing so, it has allowed for this current re-prioritisation in the protocol’s multi-chain roadmap. By launching on Ethereum first, Minterest will have access to greater launch liquidity which will fast track its multi-chain strategy.
User Experience
From an end user’s perspective, Minterest works similarly to other decentralised lending protocols, with two distinct user activities: lending and borrowing.
As an example, a lender, Lenny, supplies an approved asset to a Minterest money market pool. The assets in the pool will be used by the protocol for lending to borrowers. For as long as Lenny maintains his assets supplied to the protocol, he earns a dynamic interest rate which is algorithmically determined by the reserves of the assets that he has loaned, and the total of that asset loaned to all users of the protocol.
A borrower, Bob, provides approved collateral at a sufficient value threshold to the protocol in order to receive a secured loan in the asset desired. Using oracles for price feeds to maintain collateral ratios between the various token pools, the protocol ensures Bob maintains an over-collateralized position relative to the assets that Bob has borrowed.
For as long as Bob maintains an open loan with the protocol, he pays a dynamic interest rate that is algorithmically determined by the reserves of the assets that he has borrowed, and the total assets (of the same type) that are lent to all users of the protocol.
If Bob’s lending position becomes under-collateralized, meaning that the assets that Bob has provided as collateral are no longer above a required threshold proportion, the protocol automatically liquidates a portion of Bob’s collateralized assets and acquires the same assets that Bob has borrowed in order to reduce Bob’s outstanding loan amount from that pool and return Bob’s position to one of solvency.
Lenny and all other lenders of the same asset are compensated in line with their portion of the pool, with the interest paid by borrowers of the protocol’s assets. In the case of a liquidation event by borrowers of the asset, the lenders still receive their lent asset plus interest back.
When lenders supply assets to the Minterest protocol that may be borrowed by others, corresponding receipt tokens are generated that are representative of their portion of the pool of that particular asset. The accrual of interest to be paid back to lenders by borrowers is calculated discreetly, i.e. per block, and the calculation is done by automatically adjusting the exchange rate of the receipt token relative to the token that is supplied.
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