Why ZeroLend One?
To understand why ZeroLend One will massively improve lending and borrowing on ZeroLend, we must learn how current lending markets operate.
Most DeFi lending markets, including the current ZeroLend pool (V1), utilize one global monolithic pool, enabling users to lend their preferred crypto assets using their deposited tokens. A monolithic pool is a unified liquidity pool where users can borrow several crypto assets against each other.
Monolithic pools have two major bottlenecks:
Risk cannot be scaled: A single bad asset or oracle, if compromised, can risk the entire protocol, affecting the entire pool. This necessitates risk management that scales in parallel with the pool's growth, which can often be very expensive.
Demand cannot be scaled: Stringent listing measures to secure a monolithic pool limit the protocol's ability to list more assets and chains, which in turn restricts new borrowing demand.
As users can borrow any asset against any other asset in a monolithic pool, a manipulated asset in that pool can risk the entire TVL of the protocol.
For example, malicious actors can easily manipulate an asset with very low liquidity to increase its price and exploit the cross-collateral pool. Suppose a low-liquidity asset, ABC, is heavily manipulated to increase its price by 10x. If ABC is listed as collateral in the cross-collateral pool, the attacker can borrow assets worth significantly higher than the deposited collateral, compromising the entire lending market.
To combat these risks, DeFi protocols have stringent listing criteria for assets at the cost of limiting the scalability of their platform.
ZeroLend One features a hybrid collateral pool model enabling users to lend/borrow blue-chip assets using the cross-collateral pools while risky assets are added to isolated lending pools.
A hybrid collateral pool combats the security risk of cross-collateral pools, enabling us to list more assets to scale the protocol.
Issues with ZeroLend V1
ZeroLend was among the first DeFi protocols to list emerging crypto assets like RWAs and LRTs, ensuring our users can access the latest DeFi narratives. However, as ZeroLend started to scale, multiple challenges were encountered during the growth of the platform.
Risk Management could not scale
Deployment to multiple chains could not scale
Creation of new pools could not scale
Borrowing costs were unpredictable
Dead assets within the pool
As we build ZeroLend One, we focus on addressing these core issues and improving the protocol's UI/UX.
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