Avalance (Avax) Cripto Blockchain
Benqi Finance
Introduction
BENQI is a Decentralized Finance (DeFi) liquidity market protocol, built on Avalanche. The BENQI Protocol consists of:
BENQI Liquidity Market (BLM)
BENQI Liquid Staking (BLS)
The BENQI Liquidity Market (BLM) protocol enables users to effortlessly lend, borrow, and earn interest with their digital assets. Depositors providing liquidity to the protocol earn yield, while borrowers are able to borrow in an over-collateralized manner.
The BENQI Liquid Staking (BLS) protocol is a liquid staking solution that tokenizes staked AVAX to grant users the ability to utilize the yield-bearing asset within Decentralized Finance applications.
Why BENQI?
Decentralized Finance (DeFi) has grown substantially in the last few years. As most of DeFi's activity is currently conducted on Ethereum, the network has started to experience congestion problems that have resulted in high network fees. This has proven to be a significant barrier for both old and new users with smaller capital to justify engaging in DeFi.
BENQI aims to alleviate these problems by providing a suite of DeFi protocols on a highly scalable and decentralized platform. With a focus on approachability, ease of use, and low fees, BENQI aims to democratize access to decentralized financial products by providing users access to
Permissionless lending and borrowing (via BLM) where DeFi users can:
Instantly supply to and withdraw liquidity from a shared liquidity market
Instantly borrow from a liquidity market using their supplied assets as collateral
Have a live and transparent view of interest rates around the clock based on the asset's market supply and demand
Capital efficient staking product (via BLS) where Avalanche users can:
Freely utilize locked up capital staked in validators in securing the Avalanche network
Gain additional utility on their yield-generating asset by utilizing it within Decentralized Finance
Seamlessly stake their AVAX on the Avalanche Contract Chain (C-Chain) with no lock-up periods or tedious cross-chain transfers
Depositing
To use the protocol, the user deposits their preferred asset that is accepted by the protocol. Users will be able to earn interest based on the asset's market demand for borrowing. Additionally, deposited assets can be used as collateral to allow the user to borrow other assets. Interest earned by depositing funds offsets the accumulated interest rates from borrowing.
Additional token pools will be added as the platform grows. The additions into the protocol will be initially decided by the core team and as the protocol's governance transitions into a Decentralized Autonomous Organization (DAO), additional pools will be approved based on community votes and proposals, using the QI governance token.
Note: QiTokens (qiAVAX, qiUSDC, qiQI, etc.) - Suppliers/Depositors will be given tokenized yield-bearing tokens (QiTokens) which will be required to withdraw supplied assets from the BENQI Liquidity Market when required.
QiTokens can be transferred and traded as any other crypto-asset on Avalanche.
Earning
Depositors will receive continuous earnings (interest) on their assets that algorithmically adjusts based on market conditions. Each asset has its own market of supply and demand with its corresponding APY (Annual Percentage Yield) which changes over time.
The QiToken is a representation of the user's asset balance supplied to the BENQI protocol. It is received in the wallet for supplying assets to the protocol and functions to accrue value relative to the original asset through the token's interest rate.
QiTokens minted will be based on the underlying asset supplied to the protocol (e.g: QiAVAX, QiLINK, QiWBTC, QiUSDT, etc.).
Why borrow?
A user may want exposure on their current asset appreciating (going long) while looking to enter another position with additional capital.
As a result, the user would be able to borrow, using the current asset being deposited in the protocol instead of fully selling it off. This provides the user liquidity (working capital) without the need to sell their current asset.
Example: Satoshi requires additional liquidity to enter a new position but does not want to sell his $AVAX tokens as he expects his $AVAX tokens to increase in value.
He may do the following:
Deposit $AVAX into the BENQI protocol as collateral
Borrow $USDT using his $AVAX as collateral
Uses the borrowed $USDT to enter his desired positions
Time period for loan repayments
There is no fixed time period to repay back loans. As long as the user's position is safe (Health > 1) , borrowing can be done for an undefined period. However, as time passes, the accrued interest will grow making the user's Health decrease which might result in deposited assets becoming more likely to be liquidated.
Avoiding liquidation
In order to avoid the reduction of the user's Health leading to liquidation, the user can repay the loan or deposit more assets in order to increase their Health .
Health
Health is a numeric representation of the degree of safety of user assets deposited as collateral. A higher value indicates that the user's funds have greater safety from liquidation.
If Health goes below 1, a portion of the user's collateral can be liquidated. The Health of a user's funds is a dynamic state, and depends on the liquidation limit of the collateralized position against the value of the loan.
Health fluctuations
Health is how “safe” your loan is, defined as the proportion of total deposited collateral against the total value of the loan. It increases or decreases based on the value fluctuation of the user's deposited asset value against the user's borrowed value.
Higher Health value improves the user's collateral safety and borrow position
Lower Health value worsens the user's collateral safety and borrow position
Having Health below 1 results in the potential liquidation of a portion of the user's collateral.
What is BENQI Liquid Staking (BLS)?
BENQI Liquid Staking (BLS) is a liquid staking protocol built on Avalanche.
It tokenizes staked AVAX and allows users to freely use it within Decentralized Finance dApps such as Automated Market Makers (AMMs), Lending & Borrowing Protocols, Yield Aggregators, etc.
BLS allows users to stake AVAX on the Avalanche C-Chain* without needing to stake on the Avalanche P-Chain*. This allows users to earn validating rewards from the P-Chain without running a full node or locking up AVAX on a validating node.
Note:
Avalanche C-Chain: The Avalanche Contract Chain is the default smart contract blockchain on Avalanche and enables the creation of any Ethereum-compatible smart contracts. This blockchain is for applications that require total ordering and is the main blockchain where Decentralized Finance dApps are built on.
Avalanche P-Chain: The Avalanche Platform Chain is the metadata blockchain on Avalanche and coordinates validators, keeping track of active subnets and enables the creation of new subnets. This blockchain is where Avalanche Validating and Staking is done.
Why Liquid Staking?
Avalanche is a Proof-of-Stake (POS) network that generates returns for users "staking" the AVAX token on validator nodes to secure the network. This is done on the Avalanche Platform Chain (P-Chain) which essentially locks up the AVAX token for a predetermined time. This results in the lock up of capital, unable to be utilized within Decentralized Finance (DeFi).
Liquid Staking provides a solution for freeing up this locked up capital, creating greater capital efficiency within the Avalanche network. By tokenizing the staked AVAX into sAVAX (BENQI's Liquid Staked AVAX), users will now be able to utilize the asset within Decentralized Finance dApps while earning passive returns from Avalanche staking itself.
Benefits of staking AVAX on BLS
No lock-up periods
Zero fees for depositing and withdrawing from BLS
Full control over your asset and associated accounts
Seamlessly stake your AVAX and start earning without needing to execute cross-chain transfers to the Avalanche P-Chain
Gain additional utility on your interest-bearing asset to be freely utilized within Decentralized Finance (DeFi).
BENQI (QI) token
The QI token is a native asset on Avalanche and oversees the entire ecosystem of the BENQI protocol including future iterations of the protocol.
QI is required to vote and decide on the outcome of proposals through BENQI Improvement Proposals (BIPs). The protocol will initially be governed by the founding team, and will eventually transition to a Decentralized Autonomous Organization (DAO). As part of the DAO, holders of the QI token will be able to initiate proposals and vote on issues that will steer the direction of the protocol.
The total supply of QI will be 7,200,000,000 tokens. The token distribution is designed to ensure that market participants who actively engage with the platform will receive QI tokens. The majority of the tokens will be distributed through the Liquidity Mining program.
Token Distribution
The aim of the token distribution is to ensure healthy engagement of the protocol. A healthy protocol would be one where there is a consistently high utilization rate of the available borrowing pools balanced by an increasing lending pool.
QI holders can propose improvements and collectively decide on the optimum solution for the protocol. QI tokens will be distributed in a targeted manner via Liquidity and Community Incentives to achieve a balance of high market utilization and a wide distribution of governance participants. This is subject to changes via governance as the protocol evolves and market conditions change.