Problem: Capital Inefficiency
Last updated
Last updated
As DeFi degens, we have extensively used pool-based lending protocols like Aave, Compound, and Venus without experiencing significant issues. However, as DeFi continues to mature and is increasingly compared to TradFi, it’s worth questioning whether these platforms truly represent the best options. Is there room for improvement? We believe there is!
The inefficiency of pool-based lending protocols lies in the inability to fully utilize supplied assets. This results in a significant gap between supply and borrow APY.
For instance, if only 50% of the total supplied assets are lent out with borrowers paying 10% APY, suppliers would only receive 5% APY, assuming no fees. The spread becomes even larger when only 20% of assets are lent out at the same APY, reducing the suppliers' APY to 2%, with 80% of assets lying idle.
By matching supply and borrow demands 1:1 through third-party intermediary, capital efficiency could be maximized up to 100%. Borrowers would pay 7.5% APY, and suppliers would receive 7.5% APY. This is the magic of pool-based P2P lending.
