What is BENQI and How Does it Work?

Introduction

Decentralized finance (DeFi) is an outstanding innovation in the financial industry, offering users access to a wide range of financial services in a decentralized and permissionless environment. BENQI is one such platform that has emerged as a popular option for DeFi enthusiasts seeking high yields on their cryptocurrency investments.

The unique features of BENQI such as instant borrowing, automated liquidations, and its integration into the Avalanche network make it a popular choice for users looking to earn interest on their cryptocurrency deposits, borrow assets, and trade on a decentralized exchange (DEX). With its focus on providing a comprehensive suite of DeFi services, BENQI is well-positioned to continue growing in popularity as the DeFi industry continues to expand.

What is BENQI?

BENQI is a decentralized finance protocol built on the Avalanche blockchain. The platform offers users a high-yield savings account and lending platform, as well as a DEX for trading assets. Users can earn interest on their cryptocurrency deposits and borrow assets, while the hybrid liquidity model ensures high liquidity and low slippage for trading. BENQI aims to provide a user-friendly and permissionless platform for interacting with DeFi.

One of the unique features of BENQI is its liquidity model which combines the benefits of an automated market maker (AMM) and an order book. This model provides high liquidity and low slippage for trading larger amounts of assets. BENQI’s platform is designed to be safe and easy to use for accessing high-yield savings and lending opportunities, and trading assets on a decentralized exchange.

Avalanche Blockchain

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Source: Avalanche Network

Avalanche is a blockchain platform that aims to provide a fast, secure, and highly scalable network for decentralized applications (dApps) and enterprise blockchain solutions. It was launched in September 2020 and is built on a consensus mechanism called Avalanche Protocol, which combines elements of proof-of-stake (PoS) and classical Byzantine fault tolerance (BFT) algorithms. The platform supports the creation and deployment of custom blockchain applications using a range of programming languages, including Solidity and Rust, and offers interoperability with other blockchains, including Ethereum. Additionally, Avalanche supports the creation and management of custom digital assets and allows for the creation of smart contracts on its platform.

AVAX is the native token of the Avalanche network. It is used as a means of payment for transaction fees on the network, as well as for staking and governance purposes. Staking AVAX involves locking up a certain amount of tokens as collateral to help secure the network and earn rewards. In addition to its utility within the Avalanche ecosystem, AVAX can also be traded on cryptocurrency exchanges as a digital asset.

History of BENQI

BENQI is a relatively new decentralized finance (DeFi) platform that was launched in March 2021. It was founded by a team of blockchain and cryptocurrency enthusiasts with the aim of providing a user-friendly, secure, and high-yield DeFi platform on the Avalanche blockchain. The platform’s name “BENQI” is derived from the name of a legendary Chinese strategist, and it embodies the company’s vision of providing innovative and forward-thinking DeFi solutions.

The BENQI team started by focusing on developing a high-yield savings account that would enable users to earn passive income on their cryptocurrency deposits. This savings account offers a yield that is much higher than traditional savings accounts and has since become one of the platform’s most popular features. Shortly after the launch, BENQI expanded its offering to include a decentralized exchange (DEX) and lending platform, allowing users to borrow and lend assets directly from the platform.

Since its launch, BENQI has gained significant traction in the DeFi space and has attracted a growing user base seeking high-yield investment opportunities on the Avalanche blockchain. The platform has continued to add new features and integrations, further increasing its accessibility and ease of use for users. With its innovative approach to DeFi, BENQI is well-positioned to become a leading platform in the rapidly growing DeFi ecosystem.

Navigating BENQI’s Decentralized Exchange (DEX)

BENQI protocol is a powerful tool for managing digital assets, enabling users to lend, borrow, and earn interest on their holdings instantly. The protocol is made up of two key components:

BENQI Liquid Staking (BLS)

BENQI Liquid Staking (BLS) is a unique offering that enables users to stake their AVAX and receive a yield-bearing asset called sAVAX, which earns yield from Avalanche validator rewards. Users can freely transfer, trade, or use sAVAX in various DeFi applications, such as automated market makers, lending and borrowing protocols, and yield aggregators.

Source: BENQI - Staking

Note: sAVAX (short for “staked AVAX”) is a representation of AVAX, the native cryptocurrency of the Avalanche blockchain, that is staked on the network to secure its operations.

BENQI Liquidity Market (BLM)

Source: BENQI - Market

The BENQI Liquidity Market (BLM) is a cutting-edge lending and borrowing protocol that operates entirely via smart contracts on the Avalanche network. BLM enables users to lend, borrow, and earn interest with their crypto assets in a seamless and automated manner, without the need for intermediaries.

BENQI Ecosystem

The ecosystem of BENQI consists of several components that work together to provide a comprehensive DeFi platform. These components include:

Liquidity Market Protocol: This is the core of BENQI’s platform, allowing users to supply and withdraw liquidity from a pooled market, borrow money instantly, and view real-time interest rates.

BENQI DAO: The decentralized autonomous organization (DAO) governs the BENQI platform and token holders can vote on proposals that affect the platform’s development and operations.

BENQI Token: The BENQI token (BQI) is an ERC-20 token that is used for governance, staking, and liquidity provision on the BENQI platform.

User Interface: BENQI has a user-friendly interface that allows users to easily access the platform’s features, manage their assets, and view market data.

Integrations: BENQI is built on the Avalanche blockchain and plans to integrate with other blockchains to expand its ecosystem and provide cross-chain liquidity.

BENQI has a clear roadmap that outlines the platform’s development plans and goals. Some of the key milestones that BENQI has achieved and is planning to achieve in the future include:

Roadmap

BENQI plans to continue developing its platform, exploring new use cases for DeFi, and expanding its ecosystem through partnerships and collaborations with other projects. Most recently, in February 2023, BENQI integrated Chainlink Proof of Reserve and Automation to help secure cross-chain asset lending and borrowing for BTC, ETH, DAI, USDC, and USDT.

Why BENQI is the Future of Finance

Benqi aims to solve the problem of limited access to financial services and products for individuals and businesses, particularly those in emerging markets.

Benqi provides a wide range of DeFi services, including yield farming, liquidity provision, borrowing, and lending. These services can be accessed easily through the platform’s user-friendly interface and low transaction fees, making it a more accessible and affordable option for individuals and businesses to access the benefits of DeFi.

Additionally, Benqi also addresses the problem of impermanent loss that liquidity providers may face on other DeFi platforms by introducing its Dynamic AMM (DAMM) model. The DAMM model aims to reduce impermanent loss by dynamically adjusting the liquidity pool ratios in response to changes in the market

Benefits of Decentralized Exchange trading with BENQI

• Access to a range of financial products: Benqi offers a wide range of DeFi services, including yield farming, liquidity provision, and borrowing and lending. This allows users to access a range of financial products from a single platform.
• Low transaction fees: Benqi is built on Avalanche, which has lower transaction fees than other blockchain networks. This makes it more affordable for users to access DeFi services on the platform.
• User-friendly interface: Benqi has a user-friendly interface that is easy to navigate, making it accessible for both experienced and novice DeFi users.
• Dynamic AMM (DAMM) model: Benqi’s DAMM model aims to reduce impermanent loss for liquidity providers by dynamically adjusting the liquidity pool ratios in response to changes in the market. This helps to minimize risk and improve returns for liquidity providers.
• Decentralized governance: Benqi is a decentralized platform, which means that the community has a say in the decision-making process through a governance token. This helps to ensure that the platform is governed transparently and democratically.

Navigating the Risks of DeFi: What BENQI Users Need to Know

• Smart Contract Risk: DeFi platforms rely on smart contracts to execute transactions, and these contracts can contain bugs or vulnerabilities that can be exploited by hackers. This could result in the loss of funds for users of the platform.
• Market Risk: DeFi platforms are often exposed to market volatility and can be affected by changes in the broader cryptocurrency market. This can result in significant price fluctuations and potential losses for users.
• Liquidity Risk: Benqi relies on liquidity providers to provide liquidity to the platform, and if there are not enough liquidity providers or if they withdraw their liquidity, the platform could experience a liquidity crisis.
• Regulatory Risk: DeFi is a relatively new and unregulated industry, and regulatory changes could impact the ability of users to access and use the platform.

What is QI?

QI is the native token for BENQI and serves two primary purposes: governance and utility. As a governance token, QI holders can propose and vote on various changes and upgrades to the BENQI protocol through the BENQI DAO. Economic proposals, security upgrades, and additional protocol development are among the key parameters proposed and voted on.

Moreover, users can stake QI on BENQI Liquid Staking (BLS) to receive veQI, which is a novel utility token. veQI enables additional AVAX staking delegations to high-performing Avalanche validators. This token represents a user’s voting power for additional AVAX delegations from BLS, and the number of delegations is determined based on the validator’s aggregate vote count of veQI. Up to 30% of delegations from BLS are available to veQI holders.

QI Token Distribution

The token distribution plan for QI tokens aims to ensure healthy engagement of the protocol, with a balance of high market utilization and wide distribution of governance participants. The distribution plan includes the following allocations:

Community Distribution: 45% or 3,240,000,000 QI tokens will be distributed to the community via liquidity mining incentive programs and various community programs.

Team: 10% or 720,000,000 QI tokens will be distributed to the team, which will be fully unlocked over four years, with quarterly unlocks, and a 12-month cliff after public listing.

Treasury: 15% or 1,080,000,000 QI tokens are reserved for the Treasury, which may be used for incentivizing partnerships and ensuring the health of the protocol. The Treasury vests quarterly over 4 years, with a 9-month cliff after public listing.

Exchange Liquidity: 5% or 360,000,000 QI tokens are reserved for providing exchange liquidity, both on DEXs like Pangolin, and for CEX listings.

Tokenomics

Users can earn QI tokens by providing liquidity to the platform. Liquidity providers receive a portion of the trading fees generated on the platform, which are paid in QI tokens. Token holders can stake their tokens to earn rewards which come from a portion of the platform’s transaction fees, paid in QI tokens.

Benqi has implemented a buyback and burn mechanism to help increase the value of QI tokens over time. The platform uses a portion of its revenue to buy back and burn QI tokens, which reduces the total supply of tokens in circulation. Some QI tokens are subject to vesting periods, which means that they cannot be immediately sold or transferred. This helps to prevent large amounts of tokens from flooding the market and potentially causing price volatility.

QI token holders are entitled to discounts on trading fees and other transaction fees on the platform. The amount of the discount varies depending on the amount of QI tokens held by the user.

There is an inflation mechanism built into the token economics of Benqi, which is intended to help fund the ongoing development and growth of the platform. Specifically, a portion of the transaction fees generated on the platform is allocated to a development fund.

The maximum supply of QI is 1 billion tokens. QI’s price peaked at an all-time high of $0.4081 in August 2021 and gradually crashed down to an all-time low of $0.005649 in November 2022.

Governance

The governance of the QI token is a key aspect of the Benqi platform. QI token holders can vote on proposals related to the platform, including changes to the protocol, upgrades, and other important decisions. The governance process is community-led, meaning that any QI token holder can submit a proposal for consideration. Proposals are reviewed by the community and, if they receive sufficient support, they are put up for a vote.

Benefits of Holding QI

• Reduced Fees: QI token holders are entitled to discounts on trading fees and other transaction fees on the platform. The more QI tokens a user holds, the greater the discount they can receive.
• Staking Rewards: Users who stake QI tokens can earn rewards in the form of additional QI tokens. These rewards are tiered, meaning that users who stake larger amounts of tokens can earn higher rewards.
• Buyback and Burn: Benqi has a mechanism in place for buying back and burning QI tokens, which can help to reduce the total supply of tokens in circulation and potentially increase their value.
• Utility: QI tokens are used for a variety of purposes on the Benqi platform, including paying transaction fees and accessing certain features and services.

Assessing BENQI’s Market Position: Is it Investable?

BENQI’s unique offerings in the DeFi space make it an intriguing project to watch. The platform’s ability to provide high yields on cryptocurrency investments, as well as its borrowing and trading capabilities, may appeal to investors seeking exposure to the decentralized finance industry.

The QI token is a crucial component of the BENQI ecosystem, serving as the medium of exchange for the platform’s deFi services. Its value is closely tied to the performance of the BENQI platform, with a surge in demand for the platform’s services leading to an increase in the token’s price. As a result, investors who believe in the long-term potential of BENQI and its ability to provide innovative DeFi solutions may see QI as a promising investment opportunity. However, as with any investment, it is important to conduct thorough research and exercise caution before making any decisions.

How to Own QI

You can own QI via a crypto centralized exchange, so you can begin by creating a Gate.io account. Once the account is verified and funded, find out the steps to buy QI at the exchange. In a nutshell, you can own QI via flash swap, trading the spot market, or even using leverage.

Partnerships

BENQI has forged several partnerships in the DeFi space, leveraging the strengths of other projects to expand its offerings. One notable partnership is with the blockchain interoperability platform, Chainlink, which provides decentralized oracles to BENQI. Another significant partnership for BENQI is with Polygon, a popular Ethereum scaling solution. This collaboration has allowed BENQI to take advantage of Polygon’s low transaction fees and fast transaction times, providing a more seamless experience for users.

BENQI has also partnered with the DeFi project, Kylin Network, to enhance its data analytics capabilities, helping to identify and analyze important market trends and user behaviors. Additionally, BENQI has collaborated with several liquidity providers, including Quickswap and Cometh, to provide users with greater liquidity and access to a wide range of DeFi tokens.

Through these strategic partnerships, BENQI has been able to expand its reach and capabilities, providing users with a comprehensive suite of DeFi services that are designed to be both efficient and user-friendly.

Conclusion

BENQI is a leading decentralized finance platform built on the Avalanche network that offers a wide range of DeFi services, including lending, and borrowing. Its unique features, such as dynamic interest rates, instant borrowing, automated liquidations, and a DEX, make it a popular choice for users seeking to access DeFi services in a decentralized and permissionless environment. As the DeFi industry continues to grow and mature, platforms like BENQI are well-positioned to become even more popular among users seeking to access a wide range of DeFi services. While DeFi is a relatively new and rapidly evolving space, BENQI’s commitment to improving its user experience, and security, and expanding its partnership, shows that it is dedicated to staying at the forefront of the industry.