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Last updated: Nov 23, 2022
BENQI is a decentralized non-custodial liquidity market protocol. It is built on Avalanche and was launched in August 2021. With this protocol, users can easily lend, borrow and earn interest on their digital assets. Lenders who provide liquidity on the platform can earn passive income, and borrowers have the ability to borrow assets with excess collateral.
The Avalanche network was chosen by the project because of its multiple bridges with Ethereum and other popular blockchains, as well as compatibility with Metamask. All these contribute to an active liquidity inflow. BENQI's total value locked tripled over the first half a year of the project's existence.
The BENQI app enables users to supply their assets to a pool from which other users can borrow.
Users earn interest based on the asset’s market demand for borrowing. In addition, the deposited assets can be utilized as collateral, allowing the user to borrow other assets. The interest earned on the deposited assets offsets the accumulated interest rates on the loans. There are no restrictions on the amount of assets that can be deposited. The assets can be withdrawn if they are not actively used for borrowing and if their withdrawal will not cause the liquidation of loans.
Currently, there are eight markets supported on the platform: AVAX, QI, and wrapped tokens USDC.e, USDT.e, DAI.e, WBTC.e, WETH.e, and LINK.e. Additional token pools will be added as the platform evolves. Initially, decisions to add new pools to the protocol will be made by the core team, and as the management of the protocol moves to a decentralized autonomous organization (DAO), additional pools will be approved based on community suggestions and votes with the QI token.
Liquidity providers/creditors receive tokenized yield-bearing tokens (QiTokens), which can be used to withdraw funds from the pool when required. QiTokens can be transferred and exchanged like any other crypto-assets on Avalanche.
The team recently implemented Liquid Staking, which improves capital efficiency by allowing users to unlock their deposited capital. The liquidity token (sAVAX) will gain instant utility through support in BENQI's live lending markets.
To supply liquidity on the BENQI app, users need to navigate to and click on the MARKETS tab on the menu and select SUPPLY. Following that, users need to select the type of asset and enter the desired amount to be deposited and click on DEPOSIT. The last thing left is the confirmation of the transaction, after which the deposit is registered by the platform and starts earning interest. In return for supplying assets into the protocol, users are rewarded with QiTokens as a representation of their funds. Only the first deposit on the protocol requires confirmation from a wallet. BENQI allows its users to withdraw assets as long as the funds are not actively being used to borrow and the withdrawal wouldn’t cause a liquidation of any of the user’s loans.
Borrowers on the platform are required to deposit collateral first and make sure the “Use as Collateral” option is enabled in the Supply section when depositing. The maximum amount of funds that can be borrowed depends on the value of the user’s collateral and the available liquidity on the platform. When borrowing, users need to navigate to the MARKETS tab of the BENQI app and click on Borrow, then select the asset to be borrowed and input their desired amount. Once the transaction is confirmed, the position starts accruing payable interest.
The level of safety of borrowers’ loans is measured in so-called “Health” with a numeric representation. This depends on the proportion of total deposited collateral against the total value of the loan. If a borrower’s health drops below 1.0, they are subject to liquidation.
There is a percentage of the borrowers' fees BENQI accrues, that can be withdrawn through governance, this is referred to as a reserve factor and its level can also be set through governance voting.
The QI token is an Avalanche-based native asset of BENQI. It controls the entire BENQI protocol ecosystem, including future iterations of the protocol.
QI is required for voting and decision-making on the results of proposals through BENQI Improvement Proposals (BIPs). As part of the DAO, QI token holders will be able to initiate proposals and vote on issues that will determine the direction of the protocol development.
The total supply of QI is 7,200,000,000 tokens. Market participants who actively interact with the platform, receive QI tokens. Most of the tokens will be distributed through the Liquidity Mining program.
The BENQI team consists of several people who share a common vision of decentralization in the loan markets.
J.D. Gagnon is the co-founder of an incubator and software development firm Rome Blockchain Labs, Inc., as well as the CSO of Etheralabs, Inc. There are two more members also coming from Rome Blockchain Labs: co-founder Hannu Kuusi and CIO Alexander Szul. Hannu Kuusi has more than 20 years of experience in the ICT industry. He has been involved in cryptocurrencies since the early days of BTC.
Other team members include co-founder Dan Mgbor with a master's degree in business analytics and management science, who has experience managing blockchain-related operations; strategy manager Hansen Niu, a cryptocurrency proponent specializing in corporate strategy; and a co-founder Dexter Lee, who has been in DeFI since its early days.
BENQI participated in the Avalanche Rush program in August and October 2021. The Avalanche Rush was a liquidity mining incentive program that sought to onboard decentralized finance applications and deploy them on the Avalanche platform. The company is also collaborating with Imperium Empires - Avalanche’s first AAA GameFi Metaverse Project. Although no concrete plans on integration have so far been released, the possible incorporation of a banking system within the Imperium Metaverse powered by the BENQI protocol has been mentioned by the company in a blog post.
BENQI plans to build a DeFi primitive on top of the current lending and borrowing market. This primitive is currently being built and will offer extra yield/risk strategies to DeFi users on Avalanche.
As the team advocates decentralization, BENQI's governance will gradually move to a decentralized model. Eventually, the governance will be introduced through a Decentralized Autonomous Organization (DAO) when the distribution of tokens across wallets is sufficient and BENQI has achieved significant stability at the protocol level. From there, QI token holders will be able to propose, vote, and steer the protocol on key parameters such as economics, security, and improvements.
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