What is Lends?

Lends is a cross-chain lending platform built on Arbitrum. It is focused on providing the best lending and borrowing rates in the Arbitrum ecosystem.

The project was built to solve problems in the lending sector, such as idle funds, ineffective supply-demand balancing, and security risks stemming from pooling funds. The lack of fixed-rate lending makes it difficult for institutional users to participate.

Using its funding book, the platform aims to fix the above by allowing direct loans between parties and balancing liquidity supply with demand. The funding book mechanism uses market-driven rates to provide flexible loan structures for a broader user base.

Though built on Arbitrum, the platform supports multiple chains, such as Bitcoin, Ethereum, Cosmos, and Avalanche.

History of the Lends Project

The Lends project was launched in 2022 with the launch of Lendscape. Lendscape was a lending protocol that integrated ThorChain and focused on DeFi lending.

In 2024, the project launched its LENDS token, marketing campaign, and new user interface for users to add liquidity easily. The project also integrated ThpoorChain to add liquidity options and simplify the wallet address using THORNames.

The new interface gave platform users a quick overview of available options while checking out their positions and assets. To ensure security, Lends conducted a smart contract audit review that certified the safety of user assets.

In the months ahead, the project aims to expand its features by providing peer-to-peer lending. This aims to introduce more strategic partners to the project while developing the user base.

How Does Lends Work?

Funding Book

The funding books on the Lends protocol make its market-driven interest rate possible. These order books for lending protocols stipulate the pool’s borrowers and lenders.

Funding books allow borrowers to compete for funds on the left side with bids while lenders post offers on the right. The resulting interaction, controlled by market factors, sets the loan price, which translates directly into the interest rate.

This allows the Lends platform to provide an accurate, dynamic price that reflects the conditions of the market. This addresses the limitations of static rates determined using algorithms, which do not accurately present the value of lending risk.

The Lends protocol also utilizes artificial intelligence to manage users’ funds when deposited in the platform. This allows them to earn pool yields and additional income from Lends’ intelligent order placement.

Oracle

The Lends protocol requires accurate and reliable oracles to facilitate secure and reliable transactions. It does this by relying not on one oracle but a network of track-proven oracles to provide external pricing and data.

This oracle infrastructure ensures high-quality data feeds, even in the event of redundancy and failover. It is also an added layer of security, protecting user’s funds in the event of a malicious attack on any specific oracle.

In the event of an attack or failover, the protocol’s smart contracts switch to an alternative data source, maintaining a seamless operation.

Integration with ThorChain

Source: ThorChain website

ThorChain is a cross-chain liquidity protocol that allows users to swap tokens without a third party or intermediary. Lends Protocol utilizes ThorChain to provide interest and liquidation-free loans to users to attract borrowers.

Thor can provide these features through its infrastructure design, which utilizes available liquidity to bear yield. To offer an interest-free transaction, the protocol uses the liquidity provided to earn yields for the network. Then, it uses those yields to offset any interest due by the user.

If a user takes out a loan using the liquidity provided as collateral, the network operates on the assumption that the assets will be worth more in the future. This bet placed on the assets ensures the collateral is not liquidated even if the value of the collateral falls compared to the loan’s value.

To protect the lender, the protocol mints Rune tokens and issues them to the lender. This allows the lender to enjoy a portion of the yield generated using the borrower’s collateral. Users are also incentivized to use the saving features with higher APYs to minimize asset withdrawal.

Features of the Lends Ecosystem: Decentralized Exchange (DEX), THORFi Lending and Earning

DEX

Source: Lends Website

The Lends decentralized exchange platform allows users to conduct cross-chain swap transactions. This is possible using its streaming swap feature that breaks down large swapping transactions into sub-swaps. These sub-swaps are executed and consolidated into an outbound transaction to enable better cost and slippage during execution.

Each swap amount determines the number of sub-swaps for that transaction. The platform can optimize the sub-swaps for better efficiency, reducing the transaction’s weight on the network. The automated optimization of sub-swaps has a 24-hour duration, during which the transaction is conducted or refunded.

The cross-chain DEX has integrated nine networks: Bitcoin, Ethereum, Binance Smart Chain, Avalanche, ThorChain, Doge, Bitcoin Cash, Litecoin, and Cosmos.

THORFi Lending

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Source: Lends Website

The Lends Protocol uses over-collateralization and a burning mechanism to replace traditional interest accrual. This allows it to provide fixed interest rates and a borrowing experience void of interest, liquidation, margin calls, or repayment deadlines.

When borrowers provide the required collateral, which is always larger than the loan amount, the protocol burns the difference as RUNE. This means the total supply of RUNE tokens decreases over time, which creates a deflationary mechanism to increase the collateral-to-debt ratio.

This feature is utilized by depositing native coins as collateral and receiving debt issued in stablecoins based on the value of the collateral and the collateralization ratio (CR). Users can then hold the loan for as long as needed and repay it at any time without incurring interest.

Earn

The Earn feature eliminates the complexities of DeFi yield farming. It allows users to earn a yield on their assets without incurring an impermanent loss due to the asset’s volatile price. As a decentralized project, users also enjoy control of the assets and transparency on the yields earned with them.

To utilize this feature, users deposit any supported coin, like Bitcoin, Ethereum, or BNB, into the Lends platform. The platform then mints a synthetic asset that mirrors the deposited asset’s value. This synthetic asset is locked in a vault to generate yield, which the user can withdraw along with the principal deposit.

What is the LENDS Token?

Source: Lends Whitepaper

The LENDS token is an ERC native token of the Lends Protocol that utilizes the security of Ethereum’s infrastructure. It is used to conduct transactions in the protocol, such as lending, staking, and borrowing.

The token has a maximum supply of 625 million and a circulating supply of 63 million tokens. Its tokenomics allocates 36.8% to its seed funding rounds and 34.7% to its community and contributors. The project reserved a 5% allocation each for its team to provide market makers with liquidity. 9% is reserved for treasury, 8% for strategic rounds, and 1.5% for public sale.

The Lends protocol employs a sustainable economic model to create value for all participants. It does this by charging a 10% fee on the interest received by lenders. This revenue generated is then divided between liquidity providers and stakers. Specifically, 70% of these revenues are returned to liquidity providers, while the remaining 30% are used to reward stakers.

Is LENDS a Good Investment?

The LENDS token aims to revolutionize the finance sector by providing users with free loans at zero interest. Holders of the native token are well-positioned to enjoy pioneer benefits from the Lends project, which is still undergoing development.

It allows holders to stake LENDS and earn passive income. Users also enjoy fixed-rate lending, cross-chain swapping, and governance. This allows LENDS holders to decide the project’s future, allowing them to ensure the long-term sustainability of the Lends project.

Risk Analysis

Advantages

Lends provides the easiest, most unique lending experience in DeFi by eliminating liquidations, interest, and expiration dates. It also provides a savings feature that protects users from impermanent loss.

Lends used its funding books to reflect realistic market factors, eliminating the need for static rates. This shows users the supply and demand of the assets, along with market sentiments.

The Lends project ensures security for user assets while charging no interest and yielding income for users. This is combined with an easy-to-use interface for newbies in the DeFi space.

Disadvantages

The lending features require users to overcollateralize their loans, which wouldn’t be favorable to some users. When these loans are over-collateralized, the surplus is burned as RUNE, raising concerns about the possibility of inflation.

While features like THORFi Saving aim for simplicity, some aspects, such as understanding funding books, oracles, and burning tokens, would require users to have some technical knowledge.

Challenges

As a new project, the Lends project has not yet achieved the visibility required to develop its user base fully. This also presents uncertainty about the prospects of the project.

The DeFi lending space is already saturated with DeFi projects offering unique propositions. The level of competition experienced by Lends would limit the ability to build a loyal community, stifling its growth potential. The growth difficulty, combined with the uncertainty of the crypto space, such as price volatility and regulatory uncertainties, would be challenging for the new project.

Competitive Analysis

The Lends Protocol and Morpho focus on providing users with better lending rates. But unlike Lends, which offers a fixed-rate lending solution, Morpho positions itself as an optimizer aiming to improve capital efficiency alongside lending rates.

Both protocols prioritize security, but Morpho, an older project, has undergone extensive audits. Although Lends has conducted a security audit, its security rating is not yet prominent as a new project.

While Morpho’s community is more developed, Lends’ focus on user-friendliness and transparency would make it more appealing to users.

Notably, Morpho is a lending protocol built to improve the features of existing DeFi borrowing and lending protocols like Aave and Compound. On Morpho, borrowers can earn more yield than they would on Aave or Compound without exposing their position to greater risk. To achieve this, it combines the efficiency of peer-to-peer and pool-to-peer protocols, creating a win-win situation for users.

How Can You Own LENDS?

Users can follow a simple process to own LENDS tokens and become a part of the Lends ecosystem.

Setup a Wallet

One way to acquire LENDS tokens is to purchase them through an exchange. To do so, the user must create a Gate.io account, complete the KYC process, and add funds to the account to buy the token.

Utilize the LENDS Token

Once users have acquired LENDS tokens, they can explore the Lends platform by providing liquidity, saving, lending, and borrowing assets.

Take action on LENDS

Users can trade the LENDS token here.