Underworld: Lend, Borrow, Margin
We’re beyond ecstatic to announce our formal release of CoffinBox on SoulSwap and the first lending and margin trading solution powered by CoffinBox — the Underworld.
We would first like to thank all of you in our beloved community for your incredible patience and support over the past several weeks, enabling us sufficient time perfect these new products for you all.
What Is: CoffinBox?
Let’s review the relationship between CoffinBox and its upcoming applications. CoffinBox is a vault wherein which you may deposit your assets in order to enable integration across multiple apps on our platform.
Think of the CoffinBox as a decentralized “App Store”
Our first product we rolled out to compliment the CoffinBox is what we refer to as the Underworld, which brings a whole host of new opportunities.
What Is: Underworld?
Our Underworld Market is a margin trading platform powered by its own lending protocol. One of the neatest aspects of the Underworld that sets us apart from our competitors is the fact that it enables users to create isolated lending pairs (or markets). This maintains a unique set of advantages over our competitors who provide a more generic approach to lending.
This means that many tokens that were not previously available for shorting will finally be accessible to traders via Underworld Margin Trading.
How-To: Use CoffinBox to Access the Underworld
Our CoffinBox (or “Coffin”) is a vault that securely stores tokens and generates yield from flash loans and strategies for any protocol built on top of it. Our Underworld Market leverages the CoffinBox insofar as one holds their tokens in the Coffin and the Underworld utilizes those assets for lending, borrowing, and most-interestingly, one-click leverage trading transactions. In essence, CoffinBox operates as a wallet, separate from your externally owned wallet, that optimizes transaction time and fees, and enables dual, simultaneous usage of your tokens.
By leveraging our built-in AMM, your assets in the Coffin may be cross-applied to maximize your deposited assets. For example, by simply depositing in the the CoffinBox, you are able to use the same assets to both provide flash loans, even while the same tokens are being farmed. This provides extra revenue for you, the supplier.
Unlike with traditional lending markets, your assets are put to work, even if they are not currently loaned out.
Even if the assets are not being borrowed, you can still use your tokens to earn yields or LP fees on SoulSwap, meaning that assets are never sitting idly at an opportunity cost. Are you interested in profiting from vault strategies? Flash loans? Avoiding IL by staking a single asset like FTM, DAI, or ETH while earning farming rewards? Then it may be worth investigating how the CoffinBox may enable you to take advantage of all of these opportunities at once. Ultimately, the CoffinBox allows you to maximize the use of your tokens by offering you the ability to optimize token usage and yield by executing two tasks (or more) at once with your assets.
But How: Is This Even Possible?
In order to utilize our new margin trading platform, all you need to do is simply add a to SUPPLY/BORROW pair, which is quite similar to adding liquidity, but with one added factor.
Theoretically, anyone can create a lending pair on our Underworld Market — it takes under 60 seconds. You simply need to add your assets to the CoffinBox vault, select the asset you wish to lend out, along with the collateral you wish to put up and select your oracle.
We will enable the ability to create new pairs on our frontend, after we have sufficiently onboarded users with our existing pairs. We are following the K.I.S.S. rule, to minimize the possibility of new users being turned off by too many options to choose from. As such, we are starting off with only a select few pairs — all of which are also included in our farms.
The collateral you select cannot be lent out and the oracle you select is used to provide liquid price data from collateral to asset. Currently, our only oracle option is ChainLink’s decentralized oracles.
How Are: Interest Rates Determined?
The Underworld’s margin trading solution takes advantage of an elastic interest rate with a target utilization rate of 75%. Different parameters may or may not be chosen in the future. This rate enables the protocol to set interest rates in an automated manner. It considers the utilization and increases the interest (returns) on those asset pairs in highest demand.
How Are: We Different?
Gas Optimized Vaults and Leverage-Trading
CoffinBox itself is the definition of a game-changer. It is a single vault that holds all tokens and because it utilizes a principal location for held assets, it eliminates an unnecessary multitude of transactions, which lowers the overall gas processing fees for internal token transfers.
Our Underworld Market may capitalize on this, because it means that shorting can be done in a single transaction with more than 1x leverage.
As we expand on blockchains such as Ethereum, gas optimization will be on everyone’s minds, so we know this is music to your ears.
Limitless Potential Lending Pairs
Our limitless potential lending pairs is supported through the use of a unique isolated market framework. Unlike traditional DeFi money markets where high-risk assets may introduce risk to the entire protocol, in the Underworld, each market is entirely separate (similar to the SoulSwap DEX), meaning the risk of assets within one lending market has no effect over the risk of another lending market.
Exclusive Lending Pairs Options
The elasticity of the Underworld interest rate is also interesting when compared to other lending platforms. If an asset is temporarily under the target interest rate of 70% utilization, the reward rate will not go to zero, but the lower reward may incentivize users to take those low-demand assets out, as they are not highly sought after on the Underworld.
On comparable platforms, upwards to billions of dollars are lent out, but since they lack borrowers, the interest rate is almost zero, which is not good for suppliers. Since the Underworld is built to incorporate isolated pairs at any risk tolerance, lending suppliers will be able to gain yields, particularly on pairs unavailable to the shorting market until now.
Moreover, the more an asset is utilized, the higher the interest rate and underutilization results in an inverse interest rate.
Passive-Income from Strategies
Another way that CoffinBox benefits you through the Underworld is that it is a vault that can apply strategies. For example, certain strategies may enable you to set a pair to remain 20% liquid while the other 80% set aside for lending out or to allow placing the LP tokens in our SoulSummer to simultaneously earn farming rewards while being lent out for flash loans.
This amount of user governance is unique to our Underworld Market, where anyone may create any pair — it is up to individual users to decide which assets they find safe enough to lend out, but, in the end, platform risk is isolated to just that pair.
Isolated Lending Pairs = Limited Risk Failure
Let’s circle back to isolated lending pairs and how this will benefit you. To better understand it is probably best to compare our lending solution makeup to current platforms on the market.
Scream (Compound) pools, for example, are not isolated, which means that the protocol is entirely implicated if one of the assets goes to zero.
With that in mind, Scream (Compound) is reasonably selective on which tokens they allow you to use as lending assets, but in reality, the whole pool is susceptible to its highest risk asset. In the Underworld, where each pool is distinct from one another, you may create lending pairs at whatever risk tolerance you like and we are unique in this offering — the only on Fantom.
The Underworld’s primary purpose will serve to offer margin trading for a large variety of tokens that are not yet currently widely available for shorting. You will not only be able to short a wider variety of tokens, but you can even leverage the short.
The assumption here is that this will result in a higher trading volume on the associated swap pool, which we encourage to be executed on SoulSwap, providing more fees to buy back and burn SOUL as well as provide deeper pockets of liquidity for our exchange.
Furthermore, given the popularity of lending protocols in terms of attracting TVL, this would enable us to move closer towards our goal of receiving the Fantom Grant valued over $2M from the Fantom Foundation.
TLDR; Summary and Conclusion
Platforms like Compound and AAVE enable users to deposit assets as collateral to borrow other assets. These protocols have attracted billions of dollars, but they suffer from some major limitations. Taking away these limitations could see much larger adoption — we aim to do just this with our new Underworld Lend, Borrow, and Margin trading platform.
Key Features
- Isolated Lending Pairs. Anyone may create a pair. Users select which pairs they find safe enough. Risk is isolated to just that pair.
- Flexible Oracles. Both on-chain and off-chain solutions supported and are reported to end-users directly via the user interface.
- Elastic Interest Rates. Rates based on a target utilization of 75%.
- Gas Optimized Strategies. Our contracts are optimized for low gas operations by leveraging the maximum-potential of the CoffinBox.
- Maximize Opportunities. Your supplied assets may be used for flash loans, providing extra revenue for suppliers, you may also farm these lending pairs in our SoulSummoner or utilize a whole host of potential strategies, based off your risk-preference.
Warm Regards,
Enchantress Buns (0xBuns)
Co-Founder of SoulSwap Finance
