In decentralized finance, oracles play a critical role in providing accurate and up-to-date information on asset prices. However, relying on a single oracle provider can create a single point of failure, potentially exposing the platform to malicious attacks or price manipulation.
In light of these risks, Fringe is committed to developing a decentralized oracle solution that allows the platform to list as many assets as possible within our lending ecosystem. By diversifying our oracle sources and integrating multiple trusted providers, we aim to minimize the risk of manipulation and increase the overall security of our platform. This innovative approach ensures a more resilient price feed and fosters a healthier and more competitive lending ecosystem.
By developing our own oracle solution, we can create a flexible and scalable system that supports adding new assets and financial instruments as the DeFi market continues to grow and evolve. This adaptability is crucial for maintaining a thriving lending ecosystem, as it empowers Fringe to respond effectively to our users' changing needs and demands.
The new oracle price model is designed to work with Fringe’s partial liquidation model, offering a comprehensive and cohesive approach to risk management on our platform. By combining these two features, we can better protect our users from sudden price swings and mitigate the impact of potential price manipulation. This, in turn, builds trust in our platform and ensures a more secure environment for all participants.
The USB Stablecoin facility allows borrowers to deposit their crypto collateral and mint a stablecoin called USB that is pegged to the US dollar. By doing so, borrowers can effectively leverage their crypto holdings as a line of credit. The platform’s economic mechanism is designed to maintain the stability of the USB stablecoin by requiring borrowers to pay a stability fee that acts as an interest rate. In turn, USB savers receive interest payments, which creates a dynamic interplay between the two parties. The platform also accepts a diverse range of whitelisted altcoins as collateral, which sets it apart from similar platforms.
Subsequent USB releases will cover the platform’s censorship resistance, ensuring it remains a trustworthy and decentralized option. Alternative stablecoin mechanisms (such as those that are ‘stable’ but not pegged to a fiat currency) have languished until now because USDC-dependent stablecoins have worked fine. But that’s likely to change as the DeFi ecosystem moves away from pegged stablecoins and explores alternative stablecoin mechanisms. Specifically, mechanisms that offer stability without centralization or censorship risks.
USB’s v2 will see the possibility of eventually moving away from dollar-pegged stablecoins, as future releases of the USB facility will focus on complete decentralization and enhancing its censorship resistance.
USB will also be further empowered by the Savings feature, where USB holders can lend out their tokens to earn yield.
This addition will allow users to pool their various collateral deposits to take out loans against them as a whole.
Previous iterations of our lending design limited users to taking out loans against a single collateral asset. However, with the introduction of the pooled collateral enhancement, users will be able to borrow an asset like $USDC, $USB, or even $ETH (as more lending assets will be introduced with v2) along with a pool of multiple collateral assets. This flexibility and power of pooled collateral will enable users to leverage various assets, which can result in more diversified and robust lending portfolios. Users will no longer have to worry about the volatility of a single collateral asset impacting their entire position, as they can pool multiple assets and spread the risk.
To support pooled collateral, Fringe Finance is changing its liquidation mechanism. Previously, a borrower’s loan position had an explicit link to a particular collateral asset, and if that asset’s value dropped below a certain threshold, the position would be liquidated. However, with pooled collateral, a loan position will no longer be explicitly linked to any one collateral asset.
Instead, a borrower’s deposits will be pooled together, and a liquidator can select which collateral assets they wish to liquidate. This not only supports the flexibility of pooled collateral but also provides a more efficient and dynamic liquidation process that can quickly adapt to changes in the market.
By eliminating the traditional one-to-one link between collateral assets and loans, we aim to break down the barriers and make it possible for smaller investors to participate in DeFi lending and borrowing, regardless of their experience level or the size of their investments.
With pooled collateral, individuals can combine diverse assets as collateral for loans and margin positions. This approach focuses on an account's overall solvency rather than individual positions' solvency, thereby minimizing the impact of a single asset’s volatility on any loan position. If one asset’s value falls, it won’t necessarily trigger a liquidation, as the user’s other assets can still cover the loan. This helps to reduce the risk of liquidations and makes it easier for users to manage their collateral.
The system described above drastically changes the user experience, so the UI needs to be updated to reflect this in the product better. The new UI will be debuted at v3 along with pooled collateral features. The new UI design is a major refit, and we’re testing it in detail.
Consequently, development and testing continue for Fringe v3’s pooled collateral and the revamped v3 UI. This is to bring a new level of intuitiveness to our dApp that will help boost user adoption.