Key Concepts
Unlocking Memecoin Utility
Collateralization of Memecoins: Users can deposit their memecoin holdings as collateral to borrow stablecoins such as USDT or USDC. This feature enables users to access liquidity without having to sell their volatile assets.
High LTV with High-Volatility Assets: Higher LTV allows you to borrow more money against high-volatility assets compared to other platforms which have lower LTV. But to manage the extra risk, you are charged a safety fee. This fee goes into buying put options, which act as a safety net for your loan.
Downside Protection for Users
Moon Module: BlonkFi's proprietary Moon Module provides risk management and downside protection through a hedging pool. It acquires put options directly from partner foundations, with the strike price set at a discounted rate compared to the Time-Weighted Average Price (TWAP) spot price of the underlying collateralized assets. This mechanism mitigates downside volatility for the collateral while generating additional yield for the foundation's treasury. Moon Module also benefits stakeholders:
Borrowers: The Moon Module enables higher capital efficiency for borrowers using highly volatile assets as collateral. It provides zero liquidation risk within the first epoch, allowing borrowers to maximize their leverage potential.
Lenders: The Moon Module's protection increases the demand for lending assets on BlonkFi. This increase in demand translates into higher yields for lenders, making the platform more attractive for supplying liquidity.
Foundations: By selling put options to BlonkFi's Moon Module, partner foundations can generate higher yields for their treasury. This additional income stream reduces the sell pressure that can arise from token unlocks. Moreover, the Moon Module allows unlocked tokens to be used as collateral at higher loan-to-value (LTV) ratios, providing greater flexibility for foundation treasuries.
Put Options: The Moon Module uses put options to protect the price of the collateral pool for the first 8-hour period, effectively eliminating the risk of liquidation during this time.
Safety Fee: The safety fee is paid upfront by the borrower and is used to fund the put option premiums on a rolling basis. This fee is incorporated into the Moon Module to maintain the hedging pool and provide ongoing protection.
Price Floor: Moon Module creates a protected price floor for your collateral, which is lower than the price at which you'd normally get liquidated. This helps protect your loan during the first epoch, even if the market gets really rocky.
Throttle Module: It constantly adjusts the borrowing rates based on how much money is being deposited into the pools and how much is being borrowed. This helps prevent imbalances, where too much money is being deposited or borrowed, which could cause issues with the pools. It also limits the power of individual wallets from dominating the pools. This stops a few big players from having too much control. Overall, the Throttle Module makes sure the rates of borrowing and supply are changing at an optimal pace, keeping the lending pools healthy and working efficiently for everyone.
Alignment with Foundations: BlonkFi aligns its interests with partner foundations by purchasing put options directly from them. This approach reduces the potential for third-party hedging activities to negatively impact the price of the underlying assets, fostering a symbiotic relationship between the protocol and the foundations.
Yield Spread: Yield spread is the difference between the borrowing and lending rates of the same asset. This spread generates revenue for the protocol.
Positive Price Action: A portion of the revenue generated from the yield spread on BlonkFi is allocated towards driving positive price action for the underlying memecoins. This mechanism aims to create a virtuous cycle, benefiting both the protocol and the memecoin communities.
Coming Soon
Risk Management Rollup: BlonkFi has a long-term vision to evolve into a modular risk management protocol, enabling new projects to create swap pools with bespoke risk thresholds and seamlessly integrate across various verticals, such as AI, DePIN, and GameFi.
On-Chain Memecoin Index: In the future, BlonkFi aims to become an on-chain memecoin index platform, similar to the Binance Bluebird Index, providing a comprehensive representation of the memecoin asset class.
With its innovative approach and robust risk management mechanisms, BlonkFi positions itself as a pioneering force in the memecoin and DeFi space, fostering innovation and growth within the broader Solana ecosystem.
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