Before we get started, this is not a recommendation or endorsement to buy any token mentioned.
Similar to Maple Finance, Atlendis is a new permissionless, non-custodial, undercollateralized DeFi lending protocol on Polygon. In the future, Atlendis will also be decentralized, and hence controlled by a DAO, but keep in mind this is still operated by an early core team that has control over smart contracts.
Compared with overcollateralized lending protocols such as Aave or Compound, Atlendis is designed to enable borrowers who have passed an application process involving due diligence by the Atlendis team, in order to borrow without posting any collateral upfront. The unsecured nature of the loan exposes lenders to credit risk. So different from Aave and Compound, there is real risk in losing one’s principal if the borrower on Atlendis fails to repay their debt, similar to the contagion we witnessed with 3AC defaulting on loans and then their creditors defaulting on loans. No amount of due diligence can guarantee a loan will be repaid without collateral. However, unsecured loans allow for lenders to take higher risk bets in exchange for potentially higher yields.
During this bear market, you’ve probably noticed how stablecoin lending yields have shrunk as well. In the case of Atlendis, they offer a higher yield by catering to this more nascent use case for “DeFi institutional borrowers” like DAOs, market-makers and venture funds. Atlendis is designed to reward lenders with a yield determined by the market’s supply/demand dynamics, meaning lenders have the chance to specify how much they’d be willing to lend and at what rate. This creates an interesting dynamic where borrowers and lenders create an “order book,” allowing both parties to come to an agreement on-chain in terms of what interest rate makes sense.
In short, here’s how it works:
- A lender such as the crypto market-maker Wintermute, applies to borrow up to $10M from Atlendis.
- Atlendis launches an isolated pool controlled by autonomous smart contracts on Polygon, allowing lenders to deposit USDC at whatever amount, plus whatever interest rate they specify. Note: This is very different from Aave/Compound or even Maple. Lenders can offer up a specific lump sum of USDC at whatever rate they believe justifies the risk of lending their capital.
- Meanwhile, Wintermute has deposited some additional USDC to be distributed among early LPs as a reward. As of this writing, the Reward APY is 15.9% APY, which is making up the bulk of yield even if one’s offer to lend USDC doesn’t get accepted by Wintermute. Funds eligible to earn this Rewards APY are those who deposited before Wintermute borrows.
- Once a lender deposits USDC with a rate offered to the borrower, there’s a distinction of Passive APY for unmatched capital, meaning USDC is redirected to Aave to earn the aUSDC rate of 0.5% APY. Alternatively, the Active APY represents the interest a lender’s earning once the borrower accepts a rate and chooses to borrow their USDC.
- The opportunity to specify your own rate enables lenders to earn more predictable yields vs the variable interest rates which tend to shrink as more capital enters unsecured lending pools on comparable protocols like Maple.
Atlendis isn’t just another undercollateralized lending protocol. This is the most customizable platform…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
