Cardano’s Protocol Efficiency in Handling With Interest Rates on ADALend

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Cardano's Protocol Efficiency in Handling With Interest Rates on ADALend
Cardano's Protocol Efficiency in Handling With Interest Rates on ADALend

To diversify their investment portfolios, cryptocurrency traders turn to fixed income instruments like bonds and stocks. The cryptocurrency market is a huge economic force that cannot be ignored and is a legitimate source of debt. Its reputation is no less than that of similar products. 

Through interest rate derivatives, creditors in the cryptocurrency market (consisting mainly of lenders and borrowers) hope to stabilize incomes and reduce risks. There are two types of interest rate derivatives on the crypto market: on the one hand, the loan term can be extended and, on the other hand, the interest rates can be increased.

In traditional financial markets, there is a big difference between the rate of interest offered to borrowers and the rate of interest offered to lenders. The same applies to the crypto-financial market.

ADALend Utilization Rate

Borrower and lender interest rates will fluctuate as the credit utilization in a given pool changes. The interest rate depends on the total amount of funds available in the liquidity pool and is priced into the platform’s LP token. When more people want to borrow than there are funds in the liquidity pool, interest rates rise; If more people try to lend than borrowers, interest rates go down.

The usage rate is the ratio of the total number of tokens in circulation to the number of tokens actually used by the platform. The ADALend platform aims to keep the usage rate of unstable coins at a low level. In this way, the platform will maintain more token circulation at the same time. The more tokens there are in circulation, the more the platform supports liquid mining, and token holders are rewarded for holding tokens. Token holders are rewarded for holding tokens by receiving loan interest from borrowers. When the borrower pays off the loan, the lender repays the interest to the token holder who held the token. This makes tokens a valuable commodity.

ADALend Protocol for Efficient Idle Asset Management

The protocol will reduce unused assets on the platform by transferring some of the unused assets to a stable exchange platform and there will be no temporary losses within an acceptable range. The core program structure of the ADALend project includes the use of decommissioned assets.

Instead of storing your assets in cold storage, you can rent or borrow them to support the ADALend Lending Protocol. Not only does this help restore assets to hibernation, but it also brings profit to asset owners through the sale of assets. This, in turn, will benefit everyone in the blockchain market.