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DeFi

Over-Collateralization In DeFi Has Run Its Course

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Obtaining a loan through decentralized finance democratizes access to financial services and products. Unfortunately, the industry suffers from a rather steep over-collateralization requirement, making this option unfavorable. I feel like everyone should be able to trade the performance of their tokenized cash flow without posting additional collateral. 

The DeFi Lending Over-collateralization Problem

Even though decentralized finance successfully removes the intermediaries from the equation, the industry still has work to do. While I am confident the current $100 billion in Total Value Locked in Ethereum DeFi is merely a stepping stone, it remains crucial to cater to people outside of the cryptocurrency world. In its current form, decentralized finance is designed mainly for those knowledgeable about cryptocurrency and blockchain. The average person on the street has no idea about these concepts, let alone show any interest in exploring new options. 

To gain that angle to capture mainstream adoption, DeFi lending will need to undergo crucial changes. The use of over-collateralization is straightforward, as these are incredibly volatile assets. Unfortunately, volatility and lending do not go hand-in-hand that well, forcing users to over-collateralize their loans by a large margin. In some cases, it is required to collateralize up to 750% of the amount one wants to borrow. That steep amount limits the funds to be obtained.

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It is not hard to see why requirements like these hamper the growth of DeFi. Requiring users to provide so much capital to acquire a loan is not the best approach. I think that financial services need to be democratically accessible by anyone, and that is what DeFi should be about. Unfortunately, it is anything but that in the current landscape. 

One way to circumvent over-collateralization is by using stable assets. Stablecoins have become a staple in the cryptocurrency world over the past few years. However, stablecoins are not the most appealing option in crypto lending, as they lack volatility. For lending providers, there is a very fine line between wild price changes and not enough fluctuations.

Removing The Over-Collateralization Requirements

Although it may seem dangerous to remove over-collateralization from the equation, bear with me for a moment. I believe that users should be able to access loans in a decentralized manner. Moreover, they should choose the cash flow stream they are comfortable with, yet not face any stringent collateral requirements. Capital inefficiencies need to be addressed early on to make that aspect viable for the future. 

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Allowing participants to create lending markets, such as through Horizon Finance, is the way to go. As long as users own the underlying tokenized yield stream, they can view the performance of the cash flow without contributing additional collateral. It creates a fair and transparent ecosystem for all users, rather than creating artificial “paywalls” to access this data. 

At its core, Horizon Finance provides a different take on traditional interest rates. The game-theoretic approach for creating decentralized interest rate markets allows participants to set rate expectations. By submitting fixed interest rate bids — shared transparently — users indicate which rates they are happy to receive, although they can never earn more than the bid they submitted.

More importantly, the way Horizon Finance implements this solution strikes me as efficient use of money. On the other hand, over-collateralization is as inefficient as it can be and will hold the DeFi industry back. By removing this barrier from the DeFi ecosystem, more users can explore the decentralized opportunities at their disposal. The current requirements and over-collateralization risks will scare off many potential newcomers.

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Closing Thoughts

The future of DeFi still looks bright, even if certain industry aspects are far too inefficient. The initial popularity of over-collateralized lending has given rise to the idea this is how things should be. However, I am confident it is merely a stepping stone toward unlocking the true potential of DeFi lending. A future that doesn’t involve steep collateral requirements, let alone over-collateralization. 

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DeFi

BadgerDAO: Hackers drain $10 million in latest DeFi breach

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  • BadgerDAO suffers $10 million hack
  • Traders were sent illicit permission notifications
  • BADGER loses 15% of its value

The decentralized finance industry of the crypto sector has now become one of the most sought-after industries. This is because it provides users with anonymity, and they can carry out their activities without the prying eyes of financial institutions. Furthermore, traders are open to making huge amounts of profits in the protocols in the sector by staking or farming. However, some illicit actors would rather exploit and steal from people instead of making their profits. In yet another hack case in the DeFi sector, hackers have exploited BadgerDAO, draining $10 million from the decentralized finance protocol.

Traders got illicit permission notifications

BadgerDAO is a protocol in the decentralized finance sector that allows traders access to various lending services and takes collateral in Bitcoin. According to the platform, upon calculating funds missing through the exploits, things are sitting around $10 million. In the reports that made the rounds today, users claimed that the hack was perpetrated through BadgerDAO’s interface and not its smart contracts like most hacks. Users claimed they were sent notifications about allowing new permissions while carrying out activities on the platform. With some users allowing the permissions, the hackers could cart away various amounts of digital assets going to a worth of $10 million.

BadgerDAO’s native token plummets

After the hack, the protocol developers said that users complained that they witnessed the unauthorized drawing of funds from their accounts. However, the protocol has moved into action swiftly, putting everything on the protocol on hold at the moment. The developers have also claimed that engineers are working tirelessly to fix the issue and ascertain the level of damage that the breach may have caused. However, BadgerDAO has refused to comment on the exact amount of missing funds on the platform and the level of damage that needs repair before operations can continue.

Some analysis websites have claimed that the amount exploited from the platform is $100 million. After the hack, the native token of the platform, BADGER, dipped in value, losing about 15% of its value, and is currently trading around $22. Hacks have now become predominant in the DeFi sector as the year draws to a close. Some days ago, MonoX, another DeFi protocol, got hacked with the illicit actors carting away more than $30 million in different digital assets.

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DeFi

Someone Just Lost $50 Million Worth of Bitcoin to DeFi Hacker

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A single user of the Badger DAO protocol has lost a whopping $50 million worth of Bitcoin to a hacker

Badger DAO, a Bitcoin-focused decentralized finance project built on the Ethereum blockchain, has been drained of roughly $100 million as a result of a nasty front-end attack.

A single user has lost 896 BTC (roughly $50 million), according to blockchain security company PeckShield.

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In a Twitter statement, the team has acknowledged reports of unauthorized withdrawals, adding that its engineers are investigating the issue.

The protocol’s smart contracts have been temporarily halted.

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According to data provided by DeFi Pulse, Badger DAO is the 23rd biggest DeFi protocol on Ethereum. Last month, it topped $1 billion in total value locked.

Badger DAO allows users to earn passive income with Bitcoin by converting it to either Wrapped Bitcoin (WBTC) or renBTC and depositing it into Sett vaults that algorithmically allocate and autocompound users’ yields.

The hack happened just days before the yield vault protocol’s one-year anniversary.

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BADGER, the native token of the Badger DAO project, is down 15.3% on the news, according to CoinGecko data. 

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Gaming

GameX Ecosystem: Emerging DAO in World of Gaming and DeFi

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GameX is an emerging protocol that was built by gamers in a bid to promote the integration of games in today’s fast-growing decentralized finance (DeFi) ecosystem. Despite the fact that the blockchain and specifically the DeFi ecosystem is still in its infancy, the past year has seen the emergence of innovative projects that are notably disrupting mainstream finance. GameX is no exception.

Built on the Binance Smart Chain (BSC) network, the GameX protocol seeks to become a one-stop-shop for many aspects of decentralized gaming. This includes developing games that users can play, incorporating Non-Fungible Token (NFT) capabilities, and also rewarding users for contributing to its ecosystem development.

Gamex NFT Marketplace

GameX protocol is in the last phases of developing its NFT marketplace where digital artworks and collectibles built through the BEP-721 standard will be supported. The GameX NFT marketplace is a dynamic one and permits creators to mint their digital piece, with additional permissions that can let them list it for sale immediately or at a later time in the future.

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The protocol maintains a very good standard for the operations of its NFT marketplace and will provide a verification capability to enable users to deal with trusted creators only. While the verification badge will be obtainable easily by just filling out a form, the applicant or creator will be required to provide enough documentation in order to get verified.

According to GameX, “verified badges are granted to creators and collectors that show enough proof of authenticity and active dedication to the marketplace. We are looking at multiple factors such as active social media presence and following, dialogue with community members, number of minted and sold items.”

GameX NFT marketplace listed items will also be subject to royalty rewards which are charged when a listed item is resold.

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XGameX

The XGAMEX token that is designed as a reward system for GameX game players, as well as the buyers and sellers of listed NFTs.

Future Plans

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Over the next months, the platform is set to release a play-to-earn racing game (META RACE) in which players will be able to compete against each other. Drawing from its broad capabilities, there is bound to be an NFT incorporation into the racing game, a move that is billed to further enhance the broad embrace of the gaming outfit.

Website: https://game-x.co/

 Twitter: https://twitter.com/gamexofficial1?s=21

Telegram: https://t.me/GameXTokenOfficial

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