Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
This week, we cover a DeFi beginner tutorial on Mantle’s top money market INIT Capital.
One of the biggest challenges for DeFi protocols nowadays is bootstrapping initial liquidity in order to grow. INIT functions as the foundational liquidity layer for dApps built on Mantle and now on Blast.
Mantle itself is the 6th largest L2 based on total value deposited ($1.17B) according to L2Beat. Given we’ve covered Pendle, Agni Finance, Ondo, and more, INIT is a great protocol to get introduced to as it has established itself as the top money market protocol ($142M TVL) for lending, borrowing, and yield strategies, using what’s called a Liquidity Hook.
Similar to Compound or Aave, INIT allows users to permissonlessly lend popular assets like ETH, WBTC, MNT, USDC, USDT, and USDe by Ethena. Borrowers can collateralize these assets to borrow tokens as debt, as long as they maintain a healthy loan-to-value ratio (LTV).
INIT offers Liquidity Hooks as a “plugin for liquidity.” DApps developing strategies such as Yearn-like vaults, leveraged LP/Farming, perpetual trading, margin trading, LSTFi, and more can easily build Liquidity Hooks by writing their smart contracts to integrate or ‘hook’ onto INIT and access INIT’s liquidity in a permissionless way.
Here’s how INIT believes these Liquidity Hooks can lead to further growth of INIT:
- Lenders and lending vaults lend to INIT.
- As Liquidity Hooks (LHs) are added, INIT lends liquidity to LHs.
- The borrowing demand on INIT increases from users utilizing the integrating protocol, which under the hood is using INIT as well as users utilizing LHs directly on INIT.
- This leads to higher lending APYs, attracting more lenders and lending vaults, resulting in higher TVL and more available liquidity for new LHs to use.
- Lastly, attracting newly integrated protocols to build LHs, taps into INIT’s liquidity and the user base of the other existing LHs to capture this growth opportunity. As a result, this growth loop is continually reinforced.
Given INIT hasn’t launched a token yet, they are in Phase 2 of the INIT Points Program with Liquidity Hooks now earning points. Users can earn by simply:
- Lending (1 point/$100 per 24 hrs)
- Borrowing (5 points/$100 per 24 hrs)
- Referring friends
- Using Liquidity Hooks (1.5x-2x applied to points above)
Today, I’ll show how I can earn some passive lending yield while accumulating INIT points towards a future anticipated INIT token airdrop.
How to Lend on INIT Capital on Mantle and Earn INIT Points
Before we get started, please be aware of these risks.
- Smart contract risk in INIT Capital
- Front-end spoof attack on the app frontend
- Oracle risks
- Liquidation of a leveraged position if borrowing
- An economic design exploit
- Systemic risk in DeFi
- A depeg in stablecoins could lead to a total loss of any deposited funds
- Colluding signers on any multisig
Here’s how I get started!
- First, I connect my wallet to the INIT dapp here on the Points tab. I click Sign Wallet and follow the prompts to confirm my wallet, follow INIT on Twitter, and join their Discord. These 3 steps are required to activate my wallet to earn INIT points.
- I go to the Markets tab and…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
