Discovering Atlendis Protocol: Decentralized Rate Discovery and Fixed-Rate Loans
Series of educational articles on the Atlendis Protocol - Part 2
Welcome back to our educational series on the Atlendis Protocol! In this second installment, we will be shedding light on one of the core components of the Atlendis ecosystem – the Order Book structure. Designed to foster decentralization, the order book mechanism is instrumental in facilitating seamless rate discovery and enabling fixed-rate loans. Dive in to understand the intricate mechanics, benefits, and real-world implications of this groundbreaking protocol.
Order Book Structure
Atlendis lending pools are segmented into several smaller units termed as 'ticks'. Every tick represents a distinct lending rate. When lenders invest in a lending pool, they specify their preferred lending rate, and their capital is allocated to the relevant tick.
To provide lenders a clear picture, borrowers grant access to essential financial documents. Lenders, after assessing credit risks and gauging their own risk preferences, select a lending rate they're comfortable with. It's crucial to understand that each Atlendis lending pool caters to individual borrowers; therefore, the preferred lending rates might vary across different pools.
In the loan acquisition process, borrowers sequentially tap into these interest rate ticks, starting from the lowest, continuing until they amass their required loan amount. Thus, a loan from the Atlendis pool is essentially a combination of multiple small loans with varied rates, with the overall loan expense being defined by a weighted average of these rates.
Why an order book?
One advantage of this order book structure is that lenders themselves determine the borrowing rate on-chain, without any intermediaries. This means that the rate discovery process is completely decentralized.
Another advantage is that borrowers get fixed-rate loans. The average interest rate remains the same throughout the loan, so borrowers know exactly how much they will repay each month. This is crucial for institutional borrowers, as it allows them to budget and plan their finances more effectively.
In simpler terms:
- Lenders control the interest rate, not a middleman.
- Borrowers get a fixed interest rate, so they know exactly how much the loan costs.
A prime example of an order book is the Fluna pool, as shown in the screenshot below. Fluna matched rates from 3% to 12%, ultimately borrowing at an average rate of 11%.
Benefits of our Order Book Structure
- Predictability & Stability: Our fixed-rate loans offer borrowers the certainty they need in their repayments. This clarity in expenses aids effective budgeting and shields borrowers from unpredictable interest rate changes. Such predictability is invaluable for businesses aiming to maintain consistent cash flows.
- Empowered Borrowers: In contrast to traditional loan systems where borrowers have a passive role, our structure empowers them to actively influence their borrowing rates. By furnishing more financial details or specifying their desired reserve rate, borrowers can guide lenders in their decision-making. Additionally, the absence of capped pools promotes healthy competition among lenders to present borrowers with the most favorable loan terms.
- Transparency & Efficiency: Our on-chain settlement process enhances transparency and boosts efficiency. On-chain order books enable swift and accurate matching of lenders and borrowers, eliminating the need for middlemen.
Atlendis stands out as a preferred option for institutional borrowers and lenders due to its provision of fixed-rate loans, coupled with transparency, security, and operational efficiency. Unlike many competitors, our unique approach emphasizes decentralisation and user empowerment, ensuring that every stakeholder benefits from our platform.
Keep an eye out for our upcoming piece, where we'll delve into the rollover functionality that allows borrowers to chain loans. To keep up with the latest updates and explore more insights into the future of decentralized finance with Atlendis Protocol, be sure to subscribe to our mailing list.
Get ready to discover a financial landscape defined by adaptability, efficiency, and opportunity. The Atlendis journey has just begun. 🚀