How does the Yunus Loop smart contract work?

How does the Yunus Loop smart contract work?

Yunus Loop satisfies the market demand through the blockchain smart lending contract agreement, allowing short-term borrowers and lenders in need to disperse the flow of funds, so that lenders can obtain benefits.

The Yunus Loop smart contract lending protocol sends the participants' funds to the borrower's wallet agreement address in a point-to-point distributed manner to ensure that the participants' funds achieve zero risk loss. When a market user initiates a loan order in the Yunus Loop smart contract, the smart contract will generate 100 anonymous supervisory nodes, which will jointly generate two supervisory private keys, and the contract will automatically distribute the transaction order between the circulation person and the borrower. Through multi-signature technology, two private keys and the borrower jointly create a multi-signature lending contract. The Yunus Loop smart contract allows users to freely and safely conduct peer-to-peer financial behaviors and match various blockchain lending behaviors. And the whole process is carried out by blockchain technology, without the access of centralized institutions, the borrowing and lending between users is faster, the cost is lower, and the relative income is higher.

How does cryptocurrency collateral work?

Collateral is a common concept in traditional finance that you may have heard of before. When taking a loan, you need to provide something of value as collateral. This will be used to pay the loan if you cannot repay.

Physical Collateral vs. Fiat Collateral

Let's take a pawn shop as an example. You can pledge jewelry (collateral) to the pawn shop in exchange for a cash loan. You can then repay the loan with interest, redeem the collateral, or allow the pawnshop to keep the collateral to cover its losses. Collateral acts as a safety net, and the same concept applies to mortgages and auto financing. In these examples, goods (property or cars) serve as collateral.

For fiat-backed stablecoins like USDT, the collateral is fiat. Users pledge funds (collateral) in exchange for tokens. They can return the tokens to the issuer if they want, but if they don't, the issuer still owns the funds. This mechanism provides the soil for arbitrage, which can guarantee the state of the stablecoin peg.

What is Cryptocurrency Lending?

Cryptocurrency lending works by one user taking out their own cryptocurrency and offering it to another user for a fee. The exact way in which loans are managed varies from smart contract to smart contract. Users can find cryptocurrency lending services on centralized and decentralized platforms, and the core principles of both remain the same.

Users don't have to be individuals, they can be large encryption institutions. Institutions and individuals can also circulate their own cryptocurrencies into pools of money. The Yunus Loop smart contract manages user-initiated loan contracts and automatically matches orders between borrowers and circulators. And is supervised by 10 encryption nodes; Participants in circulation provide funds to earn circulation income and share income, while borrowers lend funds by paying dividends on capital supply and corresponding mortgage tokens.

Advantages of Yunus Loop Defi borrowing.

Use the Yunus Loop smart contract to initiate a loan, even if an individual or an encrypted institution is in urgent need of funds in the short term, initiate a single cryptocurrency loan order worth tens of millions of dollars, and the Yunus Loop smart contract will automatically collect the funds in the circulation pool and send them to the borrower through the smart contract The specified borrowing address. Even if such a loan pays short-term interest, it will cause less loss than selling it directly in the encrypted market, and borrowers can also solve their loan needs within a few minutes.

Collateral loan

Since the borrower provides collateral, the time frame for using the mortgage funds can be longer. Users can provide ETH or TRX cryptocurrency to get a loan. Due to the high volatility of cryptocurrencies, the loan-to-value ratio (LTV) will be relatively low, such as about 50%. This value means that the loan is only half the value of the collateral. This difference provides room for the value of the collateral to change if it falls in value. Should the collateral fall below the loan value or other given value, the funds will be sold or transferred to the lender.

For example, for a TRX/20USDT loan worth $10,000, the loan-to-value ratio (LTV) is 50%, and the user needs to deposit $20,000 worth of Ethereum (ETH) as collateral. If the value of the token drops below $15,000, the user needs to add more funds. If it falls below $12,000, users face forced liquidation and lenders get their money back.

Borrowers are typically loaned out in newly minted stablecoins, such as DAI, or cryptocurrencies lent by others. Lenders deposit assets into a smart contract, and the contract locks the funds for a specific period of time. After the borrower gets the funds, he can spend them however he likes. However, the borrower needs to recharge according to the price difference of the collateral to ensure that the position will not be forced to liquidate.

Penalties can be imposed if the loan-to-value (LTV) ratio is too high. Smart contracts manage the entire process, ensuring its transparency and efficiency. After the loan and interest are repaid, the collateral returns to the original owner.

Advantage

1. Easy access to funds.Crypto loans are available to anyone as long as they provide collateral or return funds through flash loans. Loans of this nature are more readily available and require no credit checks than loans from traditional financial institutions.

2. Smart contracts manage loans.Smart contracts implement automated management throughout the process, making lending more efficient and scalable.

3. Earn passive income easily.Holders start earning Annualized Yield (APY) by putting their cryptocurrencies into a yield pool without having to manage the loan themselves.

4. Large institutions holding cryptocurrency can sell a large amount of digital currency through the Yunus Loop smart contract in a short period of time without causing fluctuations in the market.

Shortcoming

1. The collateral faces the risk of liquidation.Even if the loan collateral is overvalued, a sudden drop in the price of a cryptocurrency can lead to forced liquidation.

You already know what a loan is

You've probably heard of someone taking out a loan when you're short on cash, right? A bank or company lends money to a borrower and pays some additional interest on repayment. This interest is how the bank or company makes money.

So what if you were the one who charged the interest?

That’s right, there are solutions that allow you to issue loans using your own cryptocurrency. Just like a bank or lending company, you also earn interest on it. However, this works a little differently than a standard loan. This solution is called cryptocurrency lending.

How does cryptocurrency lending work?

In simple terms, cryptocurrency lending is an alternative form of investment in which investors lend fiat or cryptocurrency to borrowers in exchange for interest. Therefore, this type of loan mainly involves two parties.

Lenders, who will lend money to borrowers in exchange for interest. The borrower will deposit encrypted assets as collateral to protect investors' investment. In this way, the lender can ensure that, in case something goes wrong, the collateral can be used to cover its own losses.

step by step guide

The lending process may vary slightly depending on the platform used, but getting a cryptocurrency-backed loan typically involves the following steps:

Why should I lend my cryptocurrency to others?

attractive interest rate

You've probably guessed the main benefit of lending out by the lender, right? That's right, interest. You may get back more cryptocurrency than you lent, which means you don't have to do anything to make a profit. Who doesn't love earning a decent passive income? Best of all, borrow at a higher interest rate than your savings account!

Avoid the volatility of cryptocurrencies

In theory, you can lend cryptocurrency as much as you want. However, stablecoin lending could be a new solution for every cryptocurrency owner. In case you don’t know what a stablecoin is, a cryptocurrency that holds the same value as some real-world asset (for example, most stablecoins are pegged to the U.S. dollar).

You can grow your assets by lending out stablecoins without the risk of change that prevails with cryptocurrencies. In other words, you have the potential to know how much you can get in return for lending out your crypto assets. Of course, you also need to remember that zero risk does not exist, especially in the world of cryptocurrencies.

Cryptocurrency Lending Best Practices

Self research

It’s worth reminding again and again: For many questions about cryptocurrencies, doing your own research can be extremely helpful. Borrowing is no different in this regard. You also don’t want to trust a platform with no security, or even accidentally fall for a scam. Therefore, it is best to use a lending platform or smart contract that has passed security reviews and has a good reputation.

Don't worry

Don't lend out cryptocurrencies that you want to cash out as soon as possible. Obviously, you cannot sell cryptocurrencies that you have lent to others. Also, let’s not forget that even with the strictest security scrutiny, the cryptocurrency world is not immune to hacks. Be mentally prepared that if such an unfortunate event happens to the platform you use, you may lose your cryptocurrency as well.

Understand the parameters

It is very important to understand the loan terms correctly. You want to make sure you know in advance when you can get your cryptocurrency back and how much interest you can earn on it. Most importantly, have a solid backup plan ahead of time in case the borrower fails to repay your funds. You also want to make sure that the platform or smart contract you use can still return your cryptocurrency through insurance or debit locked collateral.

Decentralized finance

Several decentralized finance (DeFi) protocols that have taken off recently allow you to lend cryptocurrency without a middleman. This protocol uses smart contracts to ensure that lending and borrowing go smoothly. Smart contracts can also automate transactions if certain preset conditions are met.

After lending cryptocurrency, your asset is no longer yours: you are sending the asset to the smart contract. What you get in return is a bond that proves that you are the owner of these loaned assets.

Here, of course, security issues must be considered. Taking the most famous decentralized financial lending agreement as an example, its smart contract is public and strictly audited, so everyone can manually verify the contract. While potential vulnerabilities cannot be ruled out, this does provide some form of assurance.

Unfortunately, decentralized finance’s smart contract operations mean it’s limited to a single blockchain. As such, the choice of cryptocurrencies you can lend out is often limited as well. Mostly, it is limited to ERC20/TRC20 tokens (running on the Ethereum blockchain and the Tron chain).

How do I start lending cryptocurrency?

If you are interested in lending cryptocurrency, the Yunus Loop Defi smart contract is a good choice. Just stake your cryptocurrencies to the Yunus Loop Defi smart contract.

Let's illustrate how it works: The Yunus Loop Defi smart contract is a decentralized protocol that allows you to lend crypto assets.

After lending your tokens, the tokens will be deposited into your personal wallet. In exchange, you need to pledge the designated cryptocurrency corresponding to the participating borrowing, which represents your ownership of the assets lent and the interest it generates.

Security and Control

The Yunus Loop smart contract proves that the asset you lent and the interest it accrues belong to you. After using the Yunus Loop smart contract to lend cryptocurrency, your borrowing order will be safely stored in the contract, which means that after the loan, no one else can claim your assets - except yourself.

If you want to get back your assets and interest, you only need to repay your loan order and send it back to the smart contract to get your assets.

There are many kinds of new decentralized financial services, and the mission of Yunus Loop Defi is to provide you with the highest level of security protection. The Yunus Loop Defi smart contract ensures the security of private keys and verifies every transaction. To put it simply, smart contracts provide security protection, and the user experience is simple and convenient, allowing you to fully control your assets, so you can freely enjoy the various conveniences of decentralized finance.