On 24th June, Polygon hosted Hashstack over a twitter space. A brief 30 min conversation spanned around Hashstack’s value proposition, Journey; and it’s approach to solving the major problem in defi lending — Overcollteralisation.
Before we dive into the summary, we’d like share with our readers, we are reconnecting with Polygon team today at 2:30pm UTC/8pm IST, through twitter spaces again. Today, we will be deep-diving into the nuts & bolts that make up Hashstack’s Open protocol. The challenges faced, and the solutions derived. We will expand upon our native storage scaling pattern for smart contracts — bringing eternal scalability to the smart contracts while maintaining the user facing smart contract address(es) unchanged.
A bit on the backstory
There is a vast untapped lending potential in the emerging markets. And DeFi has a unique opportunity to solve this through enabling access to capital through crypto to truly empower financial inclusion. Yet today, DeFi lending is largely over-collateralised, with restricted applications. Today, with a $100 collateral, a borrower can acquire a maximum of $70 as loan. The 42% excess collateral while secures the lender restricts the borrower’s ability to improve their personal finances. Yet, this is a market that scaled from near zero to over 100bn usd in less than 18 months. Implying the widespread perception & recogntion that DeFi is an extension of tradFi, i.e. traditional finance in enabling cross-border cost efficient solutions.
Our Journey with Hashstack began with an intent to solve this problem of over-collateralisation in the DeFi lending. We have spent over 10 months researching the existing projects, & their thesis behind not facilitating under-collateralised or un-collateralised loans. During our conversations with over 230 defi projects, we discovered that almost every one of them were of the opinion that undercollateralisation is only possible through on-chain credit risk oracles. Simply put a credit score mechanism for the defi. While this is true, less than 3% of all the cryptocurrency wallets possess enough onchain for reliable credit scoring. We need a middleware solution that bypasses the need for credit score, and yet addresses the problem of over-collateralised lending in defi.
The solution, Hashstack’s Open protocol.
On Hashstack’s value proposition
“Our mission statement is to improve the usability of decentralised finance for the crypto naives. We are solving the problem of over-collateralisation with restricted applications. An average crypto retailer pays a loan of $142 to acquire a loan as little as $100. Through hashstack, anyone can borrow loans which is 4.28 times more than our competitors are offering. This is permissionless and transparent.
We have integrated dApps across 4 blockchains. As a builder of defi, Hashstack told the Polygon team about the critical problem that Hashstack as an open protocol is solving. As an example, one can borrow a loan of $300 by giving a collateral of $100. These immediate cash needs can be used for trading capital and other financial needs.
dApps that Hashstack has integrated
In the testnet, we wanted to validate our hypothesis. Factoring in the constraints and convenience, our testnet was spun off on BNBChain.
Value proposition as an organisation
As an organisation, we look at problems that have an impact at scale. In this process, we developed product — Open, built on the protocol standard of the same name. This product offers 3 critical value-add.
- Under-collateralised lending is the first value proposition.
- Capability to integrate dApps across EVM and Non-EVM chains
- Display Layer 3 capabilities that are purely onchain
On Undercollateralised v/s uncollateralised solutions
Can be differentiated through two vectors
- Value — Focuses on the end user for whom we are giving the loans
- Risk — Since out of $300 dollars as a loan that one gets, $230 dollars remain on the protocol so minimum to no risk.
On major capabilities of Hashstack’s Open
- Undercollateralization — First & only working solution solving overcollateralised lendindg problem for the crypto retail.
- Dual liquidation mechanism — Solves for single point failure dependencies on liquidators,by activating protocol processed liquidations in the event of liquidator’s inability to process timely liquidations.
Launched private testnet in early February this year; which lasted till late April. The testnet was opened to public in May.
Today, 6,200 users on an average have 15,419 transactions. Out of this, 20% of transactions are on loan requests. $57 as loans we deploy loans. We are better off when compared to our competitors who have average 15% in case of Aave, 33% in case of compound.
On celebrating 1 year officially.
Validation of our hypothesis has been a major boost to our efforts solving the overcollateralisation problem. This was amplified with acquiring US $250Mn testnet liquidity.
On immediate goals
- Main-net launch — End Aug/ Early Sept
- Launch on Polygon technology
On Hashstack x Polygon synergy
Polygon offered invaluable support building, integrating various dapps on Polygon network. Few points i’d like to highlight that appears to be unique to Polygon being
- Network Reliability
- Builder ecos
- Timely response & proactive communication from the Polygon team.
Message to the budding builders
“There are a lot of interesting problems to solve in the defi space. Pick a problem and work diligently.”
About Hashstack: Hashstack builds critical infrastructure necessary to further the usability of decentralised finance.
Open: Hashstack’s solution to the over-collateralisation problem in defi lending, Open is a non-custodial money market protocol designed to enable secure under-collateralised loans on-chain.
About Polygon: Polygon is a decentralised Ethereum scaling platform that enables developers to build scalable user-friendly dApps with low transaction fees without ever sacrificing on security.