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Balanced: ICON’s First DeFi Platform is live

Balanced: ICON’s First DeFi Platform is live

The wait is Over. Balanced is finally here. We have all been hearing about the launching of Balanced on the ICON network. But what really is Balanced?

To understand Balanced, first, we need to have knowledge about the ICON network. DeFi is a new blockchain ecosystem that has been growing on the ICON ecosystem. Unlike traditional finance that has a centralized authority that controls the system, DeFi is Decentralized Finance. As the name itself suggests, Decentralized means it does not rely on central financial authority or intermediaries to offer traditional financial instruments.

 

DeFi has digital currency like Bitcoin, Ethereum, etc. However, these currencies are very volatile in nature because of the fluctuations in price. Unlike traditional finance, for DeFi through smart contracts, we can exchange assets either through Automated Market Maker such as Uniswap or decentralized exchange that is without any centralized authority. For DeFi on ICON, ICX serves as our currency and in order to have a more stable price, the ICON ecosystem pegs ICX with USD. ICON’s mission is to provide interoperability among different enterprises. The main objective of the ICON ecosystem is to create a developer-friendly environment and use blockchain in a meaningful way on the ICON network.

 

This is where Balanced comes into play. The balanced prototype which was made with the collaborative efforts between ICX station, PARROT9, Dan Brehmer from ICONOsphere, and Galen Danziger is the first Defi project on the ICON network, the goal of which is a decentralized form of payment through ICX for the ICON ecosystem. Balanced users can sign in using the ICONex extension in their browser, or through a DApp browser like the one in MyIconWallet. In Balanced, we can lock up our ICX as collateral and mint a certain amount of USD based on how much ICX we have locked. We need to deposit unstaked ICX for collateral. The unstaked ICX is then staked without having to give up the staking rewards. So, what is unstaked and staked ICX? Unstaked ICX is the token that has not been locked up for a period and can be traded anytime unlike staked ICX which is locked for a period and staked ICX gives you certain staking rewards. One of the perks of Balanced is that one can offer unstaked ICX as collateral and still get staking rewards.

With the collateral ICX, we can borrow money of a particular amount for the amount based on the pricing of the ICX. The balanced prototype is designed to be over-collateralized. Meaning, you cannot have 1 ICX as collateral and mint $1. The rate of collateral is 400% which means we need 4 ICX so mint $1. This provides compensation to the investor if the price goes and protects them. When we mine the balance token which is the governance token for balanced protocol, it allows us the right to vote on future changes and profit-sharing i.e. a portion of fees that come through the opening and closing positions and the available AMM in the trading platform will be put aside for the balanced token holders. We can only mint or acquire balance by actually using the trading platform. Using a trading platform doesn’t just mean depositing collateral but you also have to borrow and can earn future rewards, we should add liquidity to trading AMM.

So, when does one stop getting balanced tokens or does one always have a stake in the protocol? In order to have a stake in the protocol, we have to keep the risk ratio under control. Based on the price of ICX, the risk ratio changes. The risk ratio indicates the point below which if the ICX price goes down then we will stop earning balanced tokens. We have already learned that the loans are over collateralized by 400%, so the collateral is locked at 400%. The ICX does not liquidate in order to pay the loan till 150%. This shows the huge buffer that is created to ensure that people aren’t taking a very big risk but in case someone was in that position, it ensured that something is built in the protocol to protect them.

 

The balanced protocol differs from other protocols because balanced charges an upfront fee to take out the loan and it charges a small fee to pay off the loan. In balance, we don’t have to pay an interest rate for the loan unlike in synthetix and other platforms that exist in Ethereum. However, the risks in the balanced protocol is the risk of losing the collateral ICX in liquidation and the smart contract risk. In conclusion, it is safe to say that Balanced is still in the developing phase and it gets more mature and more robust with each day and it provides opportunities to trade without having to sell ICX or waiting for the unstaking period.

 

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Here is a link to the videos that might help you understand Balanced Network and the Defi ecosystem – Must-watch videos for Balanced Network users

Check out the Balanced website.

Try the Balanced DeFi App.

If you have any queries, head over to Balanced Telegram Group.

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