v2.1

v2.1 includes atomic repayments, support for multiple lender assets, multi-chain capability, an innovative liquidation model, decentralized backend infrastructure, LP token collateral, mulitisig wallets for DAOs, and a gateway for $ETH wrapping/unwrapping.

Partial liquidations

The partial liquidations feature allows for liquidations to only be paid up to a point above the position liquidation threshold. This gives borrowers more flexibility in managing their loans and mitigating risks. Partial liquidations are a significant development for Fringe Finance and will help to create a more efficient, stable, and attractive platform for both borrowers and investors.

One of the most significant benefits of partial liquidations is for borrowers. Under this model, borrowers are only charged the liquidator reward fees associated with the partial liquidation to bring the loan back above the minimum collateralization level. This is compared to the current system, where borrowers face liquidator reward fees on a full liquidation. Furthermore, borrowers will retain the remaining open loan position they entered into and thus will still be positioned according to their original intent. These benefits will make borrowers’ experience better.

Additionally, partial liquidations could improve the liquidity of the platform, which could make it more attractive to new users.

With this development, more liquidators are incentivized to participate, given the lower secondary market liquidity requirements to dispose of collateral won in a liquidation. This makes Fringe’s liquidation process more efficient and reduces the likelihood of positions becoming insolvent, thus improving the Fringe platform’s stability.

Atomic loan repayments

The atomic loan repayments feature simplifies the repayment process by enabling borrowers to repay their loans in a single transaction.

Atomic loan repayments make it easy for borrowers to pay off loans without having to gather the exact lending assets required to repay. Instead, the Fringe Lending facility will automatically use the collateral asset that backs the loan to repay it, swapping some of the collateral assets for the lending asset through a DEX.

The lending assets obtained through the swap will then be used to repay some or all of the outstanding loan. This streamlines the repayment process, consolidates multiple transactions, reduces gas fess and creates new opportunities for leveraged long/short options.

Multi-asset lender tokens

This new feature allows lenders to lend (and borrowers to borrow) assets beyond $USDC.

With Fringe’s v2.1, users can now access a broader range of assets, such as different stablecoins and most of our listed collateral assets, including top-tier assets like $wBTC and $ETH. This feature introduces further diversification and risk management to Fringe Finance, also reduces reliance on any one asset.

Multi-chain support

Fringe v2.1’s multi-chain support will enable users to access lending services across various blockchain networks seamlessly. In particular, as mentioned in our October 2022 monthly update, Fringe is currently targeting Polygon, Optimism, and Arbitrum, and attempting to begin these efforts with a launch on zkSync.

zkSync is a leading Layer-2 scaling protocol for Ethereum that uses optimistic rollup technology to allow users to transact on the Ethereum network with faster confirmation times and lower fees. By leveraging zkSync’s scalability, we will be able to offer our users fast, cheap, and fully decentralized crypto loans with multi-chain capabilities.

LP token support

Fringe Finance is breaking new ground by introducing lending backed by LP tokens, a highly underexplored area of DeFi.

Fringe’s v2.1 allows users to use any whitelisted LP token as collateral when borrowing assets on Fringe’s Lending Platform, offering unprecedented flexibility and access to the untapped value of Liquidity Pool tokens. Through overcollateralized loans, liquidity providers can unlock this value without closing their LP positions, giving them access to stablecoin capital to participate in other DeFi opportunities or increase their exposure to liquidity pool yields through leverage. With this, Fringe Finance enables LP providers to further optimize their yield-earning positions.

Unlike the few options currently available, Fringe will implement this along with safety mechanisms that safeguard stability and platform solvency.

Improved interest rate model

Fringe v2.1 introduces an improved interest rate model that maximizes the percentage of lender funds being loaned out, thereby increasing revenue for lenders and decreasing costs for borrowers. The new model targets a utilization rate of 85%, striking a balance between liquidity and yield earned on lenders’ capital.

Unlike the old model that used a hard-coded mapping between utilization rates and interest rates, the new model dynamically adjusts interest rates to incentivize lending and borrowing as necessary. Interest rates are continually reduced when the utilization rate is lower than the target and increased when it exceeds the target. The interest rate change is limited to a range of -5% and 5% per week, with a maximum change of 5% when the utilization rate is 100%. The new interest rate model enhances capital efficiency and profitability for lenders while sacrificing slightly lower liquidity.

Multisig DAO wallet support

Our integration of multisig DAO wallets will provide a higher level of security and enable more efficient management of a DAO’s resources.

Multisig DAO wallets are a crucial step towards our vision of bringing DeFi to Everyone, and empowering DAOs with greater control and flexibility over their treasuries. With the built-in security of a multisig setup directly in the Fringe ecosystem, DAOs can optimize their resources and confidently navigate the complexities of a decentralized landscape, using the Fringe Finance ecosystem as they see fit.

Decentralized backend

Fringe’s v2.1 includes two crucial features designed to protect us against the risk of censorship posed to DeFi apps: a decentralized backend and integration with decentralized indexing services.

The move to a decentralized back-end, motivated by increased security, makes the platform less vulnerable to attacks and improves transparency. Fringe Lending now employs The Graph and this enhancement is one of our new features to continually increase the platform’s censorship resistance.

As a follow-on after v2, we will provide an open-source, free-to-download frontend that anyone can host. This includes deploying a frontend on IPFS in the near future, which will allow multiple instances of the dApp front-end to be hosted simultaneously by independent parties. By doing so, any single actor’s attempt to deactivate any single front-end instance will be rendered powerless. Additionally, we will open-source our front-end codebase, offer grants for actors to host the front-end, and plan to deploy it via IPFS.

To mitigate the risk of backends being deactivated by cloud service providers, we will integrate with decentralized blockchain indexing services and make API endpoints open-source and accessible. This will enable us to provide our users with a more secure and reliable experience.

We are also taking steps to minimize the risk of centralized RPC providers by designing our RPC integration to be easily reconfigured in case the need arises to change RPC providers. Other solutions are being considered to further reduce the risk of centralized RPC providers.