Paribus: Unlocking Liquidity for Unconventional DeFi Assets
In the post-Covid times, the DeFi sector has grown significantly. 2020 was even marked as the year of DeFi. The number of DeFi projects out there goes up with every passing day, but this evolution is also unveiling the various pain points of DeFi. For instance, with NFTs (non-fungible tokens), there are only a few ways of generating passive income at the moment.
In fact, with most DeFi assets, liquidating them using conventional means turns out to be quite difficult. While yield-bearing assets become illiquid very often, synthetics face risks associated with systemic protocols. Paribus is a platform aiming at solving the particular issue of DeFi assets going stagnant by transforming these assets to suit the liquid market conditions. Paribus offers a lending market where you can use your stagnant DeFi assets smoothly with assured returns and makes non-conventional assets more interoperable, predictable, and reliable for investors.
How Does Paribus Function?
To put it simply, Paribus is a Cardano-based cross-chain DeFi protocol that will unlock underlying liquidity for a wide range of both conventional and unconventional virtual assets. The platform works to offer DeFi asset holders and investors the opportunity to extend the reach of their otherwise stagnant digital assets and positions.
The team behind Paribus follows the principle “If it can be sold, there is a market value. If it has value, it can be modeled”. They believe decentralized financial products are “not siloed; they are inclusive, borderless and need to be truly interoperable financial instruments, capable of being used within DeFi protocols, on any chain”. Hence, while the Paribus platform provides support for conventional crypto assets like USDT, it also looks to expand to support rarer assets like NFTs.
Paribus has built upon the ideas of several DeFi platforms that came before it, such as Yearn. Finance and Compound. For instance, Paribus takes the interest modeling approach from Compound and expands the idea to go beyond just the regular crypto coins and tokens. Therefore, Paribus works using the concept of ‘liquidity pools’ “with algorithmically derived interest.
What Assets are Supported by Paribus?
Since Cardano can plug into several existing blockchains, Paribus will also be able to unlock liquidity across multiple blockchains and their assortment of virtual assets. As mentioned before, along with traditional assets, Paribus will also support assets like NFTs, Virtual Lands, and Synthetics.
- Non-Fungible Tokens (NFTs): Paribus looks to enhance the economical value of these unique digital assets with better liquidity and more options to use them without just selling the NFTs. Through Paribus, owners of NFTs will be able to unlock liquidity with collateralized loans against their NFTs and finance other trades and investments.
- Virtual Land: As a recent Decentraland sale showed, Virtual Land is a steadily growing aspect of the DeFi world with land going for as much as $900,000. Paribus aims to support this asset class by proposing a suite of smart contracts that will allow for collateralization with Virtual Lands, and try out ideas that will unlock liquidity through these assets with borrowing and lending.
- Synthetics and LP (Liquidity Provider) Tokens: With a target of serving more sophisticated use cases with both Synthetics and LP tokens, Paribus aims to build a product line for borrowing and lending to better leverage the various underlying assets.
There are two primary types of users on the Paribus platform, which are:
- The Lenders: For investors who don’t plan to sell their virtual assets once and for all, Paribus provides an opportunity to earn a passive income from their assets instead of leaving them idle. Lenders act as the liquidity providers in the Paribus ecosystem and earn interest in return for playing this role. Since Paribus will provide Deposit APR(%) based on factors like utilization rate, lenders can estimate their earnings by the Deposit APR(%) for any given asset.
- The Borrowers: As Paribus aims to act strictly as a collateralized loan platform, any borrower must deposit an asset of their own to borrow against. Therefore, borrowers are also indirect liquidity providers on Paribus, and they help the platform stay sustainable and self-sufficient.
The PBX Token
The PBX token is the governance token of the Paribus platform. The PBX token was built to facilitate decentralization on Paribus in a way that lets all PBX holders participate in platform governance. Just like any governance token, PBX allows owners of the coin to create and vote on governance proposals. Further advantages of the PBX token include the fee-sharing aspect of it; PBX token holders can gain a percentage of the fees generated by the platform following the number of tokens they hold.
You can find out more about and follow the progress of the Paribus platform through their official website.