A panda is here to revolutionize lending on Cosmos. Mr. Interchain MoneyBags loves crunching numbers and munching on Bamboo. He has now decided to leverage his expertise to bring an efficient lending protocol to the Interchain.
Bamboo is a lending protocol on Persistence Core, focused on yield-generating assets and core IBC assets, where users can participate as depositors (lenders), borrowers, or liquidators.
Let’s take a look at the vision for Bamboo.
The evolution of financial markets in the modern era has included some key components in the monetary chain of value. One of the most essential has been money markets, characterized by debt instruments traded between large institutional investors, traders, and retail customers alike. Initially, these money markets facilitated liquidity swaps between banks and companies and ensured the availability of funds for retail customers.
The advent of blockchain technology has led to the development of a decentralized economy. Enter the world of decentralized lending/borrowing applications that acted like money markets by incentivizing users to pool liquidity, which anyone can access instantly.
The Rise of DeFi
Following the DeFi Summer of 2020, The open and transparent financial paradigm of DeFi has attracted billions of dollars. Permissionless loans played a crucial role in the rise of DeFi. Pioneers in the lending space like Aave & Compound became mainstream and laid the foundation for the first generation of DeFi applications. Users can now deposit their assets to earn a yield, while borrowers can take leverage using their assets as collateral. Due to the volatile nature of crypto markets, loans are mostly overcollateralized to manage risk.
DeFi lending protocols generated over $30B in borrowing volume during the last two years.
However, Innovations in lending protocols are mostly limited to each layer-1, like Ethereum and its ecosystem. This leads to the fragmentation of liquidity among a sea of competing L1s. DeFi deserves an Interchain lending protocol.
Building in Cosmos
Cosmos is the Internet of Blockchains, a network of individual chains offering customization and sovereignty to each chain.
Cosmos takes a different approach to solving scalability, Where individual blockchains are secured by independent validators while interacting with each other. These blockchains(or zones) are customized for specific use cases. For example, Shade is the privacy hub focused on privacy-focused dApps; Persistence is the liquid-staking hub, etc. The IBC (Inter Blockchain Communication) protocol allows these blockchains to communicate with each other seamlessly, giving users access to a thriving and ever-expanding ecosystem of blockchains.
DeFi in Cosmos
DeFi in Cosmos has been growing rapidly as an increasing number of projects realize the app-chain vision and aim for more granular control over their stack while being part of a growing ecosystem. The recent announcement of DYDX coming up as a Cosmos chain has amplified this notion.
The number of zones in Cosmos has grown significantly, with over 50 zones at the time of writing. As the Interchain keeps expanding, the demand for credit grows. Money markets serve as a foundational block for a thriving DeFi ecosystem.
DeFi protocols on multiple layer-1s lead to the fragmentation of liquidity and limited opportunities for users. Building on Cosmos gives users access to a whole ecosystem of blockchains built for specific use cases, and the low cost and fast transaction speeds add up to a better UX.
Cosmos DeFi is about to explode, and a Panda is here to bask in the glory.
Mr. MoneyBags loves sustainable yield and is a fan of yield-bearing assets like LSDs (Liquid Staking Derivatives), offering a stable yield to users.
A lending protocol for LSDs and other yield-generating assets would allow users to maximize capital efficiency on their assets. It would unlock billions of dollars worth of locked capital to be used as collateral. Mr. Moneybags believes that liquid-staked assets could be the default assets in DeFi in the future.
Yield-generating assets make up for good collateral since overcollateralized loans are not very capital-efficient by nature, and Yield-Generating assets allow the user to earn a yield on their locked collateral.
Moreover, interesting use cases like self-repaying loans can be built around LSDs, where the staking yield pays for the interest on a loan.
Bamboo is built on Persistence One, the Liquid Staking HuB for PoS, and would support LSDs from other liquid staking zones like Stride and Quicksilver.
Over $5B worth of assets are locked as staked assets in the Cosmos ecosystem. Bamboo Zone would unlock these assets into DeFi by supporting liquid-staked assets.
We are excited to build the lending protocol for yield-generating assets, laying the foundation for a thriving DeFi ecosystem on Persistence Core.
Bamboo is currently in active development. Stay tuned for more updates.
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