Blockchain has opened doors for decentralization and brought a range of products to the finance industry. From Aggregators to DEXes, there’re promising projects running successfully on popular blockchains. Among the DeFi projects, we have Beta Finance. Backed by Sequoia Capital, it is a permissionless money market protocol for lending, borrowing & short selling crypto assets. A promising DeFi project that brings market stability to the ecosystem. The protocol has started gaining traction from traders and investors. Having said that, it’s the right time to jump in and review Beta Finance.
|
Table of Contents |
What is Beta Finance?
Beta Finance is a permissionless, cross-chain money market protocol for lending, borrowing and shorting crypto assets. Being permissionless allows anyone to create a money market for any crypto asset, anytime.
There’s no DeFi application focused on shorting crypto assets to hedge price volatility. Beta Finance gives the ability to short crypto assets and enables users to become an opposing force to price volatility.
The vision of the project is to reduce excessive price volatility in the DeFi space by following an isolated collateral model. Take for example, if you have 10 ETH and shorting two crypto-assets i.e $LUNA and $MATIC by allocating 5 ETH to each of them. If $LUNA spikes in price, you’re at risk of liquidation of 5 ETH only, the other half will not be put at risk since it is allocated to $MATIC.
Beta Finance is Live on Ethereum & Avalanche C-Chain
Key elements of Beta Finance:
The protocol has the following stakeholders –
- Lenders
- Borrowers
- Traders
- Liquidators
Lenders:
Lenders deposit the tokens on Beta into its money market and earn a risk-free yield (up to 1000%). Lenders can also create the tokens if it doesn’t exist on the platform. The interest is paid to lenders from the borrowers and short-sellers for borrowing and short selling assets.
Upon deposit, the lender will receive bTokens, representing his stake in the lending pool. The stake will determine the share of interest received from the asset borrower.
Borrowers:
Borrowers borrow crypto assets deposited by the lenders by supplying ETH or stablecoin (USDT) as collateral. Beta follows an LTV (Loan-to-value) ratio for lending assets to the borrowers. The LTV ratio must be below the safety threshold set by risk parameters by placing assets into different tiers.
The initial position is set below the safety LTV threshold to protect the users from immediate liquidation.
Details about Debt share, Collateral size and factors can be read from the Whitepaper.
Traders:
Traders can short-sell any crypto asset by depositing ETH/Stablecoin as collateral. Beta provides “1-Click” shorting feature to initiate and manage the short position.
On the surface, it will be just “1-Click short” but behind the scenes, Beta Finance will borrow the underlying asset from the money market after checking sufficient collateralization. The borrowed token is then swapped through the selected DEX (Sushiswap, Uniswap etc) to the collateralized token used.
The newly swapped token is then staked with the principal collateral used in the short position.
Liquidators:
Liquidators earn bounty rewards for liquidating under-collateralized assets.
Refilling & Repaying:
Refilling in Beta Finance means adding additional collateral to the current borrow or short position. Users can refill to decrease the loan-to-value (LTV) percentage to avoid liquidation.
Repaying on the other hand is when the platform enables users to either repay their debt using collateral or borrowed token. During repayment, users need to specify the amount of borrowed tokens to repay.
Beta will automatically deduct the full debt from the collateral and initiate a swap on DEX to obtain the borrowed/shorted asset for repayment on behalf of the user.
Risk Management:
Beta Finance uses the asset tier model to determine the risk configuration of assets. Each token is assigned a tier and the tokens in the same tier share the same risk configuration –
The protocol uses an isolated collateral model. If an asset is compromised, the entire protocol will remain safe
What is BETA Token?
BETA is the native utility token of Beta Finance. It has the following utilities –
- Staking
- Liquidity Mining
- Governance
Staking:
Token holders can stake their tokens on the platform and earn incentives. They will receive a portion of revenue generated by the protocol.
Liquidity Mining:
Liquidity providers can stake their assets into the liquidity pool to enable borrowing and short selling of tokens. By depositing assets on the platform they are eligible to receive BETA tokens as part of the liquidity mining program.
Governance:
BETA holders are eligible to participate in the key governing decisions. They can vote and influence product features and key parameters of Beta Finance.
The total supply of BETA token is capped at 1000,000,000
BETA Coin Price:
Please check the latest price of BETA coin –
Where to buy BETA token?
Binance exchange is the only platform where BETA can be purchased. Other than Binance, Pancakeswap DEX is another platform where users can swap assets to purchase BETA tokens.
This completes my review of BETA Finance. In the next post, I will talk about SafePal Wallet & Terra LUNA crash. If you’re a fan of blockchain technology then do share this post on your social handles and educate everyone around you. Remember to subscribe to my YouTube channel for more informative content, released every week.
DISCLAIMER:
Cryptocurrency is a highly volatile market. All the information shared in the post is for knowledge purpose only. By no means, it’s financial or investment advice. Readers are responsible for their own investment decisions and should only invest in cryptocurrency after proper research.
[post_grid id=”6111″]
Paras is a blockchain writer & video creator at Katoch Tubes. In his free time, he loves watching space exploration documentaries & Hollywood movies.