The main network is officially launched, how does NAOS Finance carry out real-world asset lending through sub-protocols Formation and Galaxy?
Written by: angelilu
Written by: angelilu
Kevin Kelly, author of "Out of Control," said in 2014: "Traditional banks will disappear within 20 years."
The development of the Internet and financial technology has indeed brought challenges to traditional banks, but many banks are actively embracing new technologies while introducing new ones. They claim to be Internet banks and seem to have overcome this difficulty. In fact, what can really shake the status of traditional banks is not having technologies that can be absorbed by them, but breaking their centralized structure.
DeFi once again challenged traditional banks with the concept of decentralized finance, directly hitting the vital gate of traditional bank centralized architecture.DeFi is developing rapidly but is still in its early stages. The recently emerging concept of DeFi 2.0 is also trying to push DeFi to a wider circle. Currently, the entire networkDeFi total lock-up volume
More than 260 billion US dollars, in order to have an impact on traditional banks, DeFi breaking the circle is unstoppable.
NAOS Finance is a decentralized real-world asset lending protocol, which aims to introduce more stable high-quality real-world assets into DeFi lending as collateral, and is based on the global circulation, decentralization, and permissionless characteristics of encrypted assets. Companies in the real world provide flexible and convenient funds, which not only solves the problems of poor liquidity of global funds and low capital utilization, but also builds a bridge between the DeFi world and the real world.
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How to connect with real-world assets in a decentralized way has always been a difficult problem. NAOS Finance's solution is to improve the lending logic through two sub-protocols, namely the liquidity protocol Formation and the real-world asset lending protocol Galaxy.
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Liquidity Agreement Formation
The liquidity agreement Formation is closer to the DeFi form that most users understand, that is, users can get benefits by depositing stable coins. At present, the stable currency that the protocol supports is DAI, and more stable coins will be supported in the future. In addition to the basic liquidity incentives, Formation has upgraded the gameplay. Users can mint synthetic assets nUSD equivalent to 50% of the value of deposited stablecoin assets. The value of nUSD and DAI is 1:1 anchored, which can be used in the Formation protocol Staking to earn liquidity income. In addition, the utility of nUSD also includes that it can be invested in the Beta Pool of Galaxy's insurance fund pool to earn higher loan income or be used for insurance compensation in the Alpha pool. At the same time, Formation will deploy the stablecoin assets deposited by users to income aggregation protocols, such as yearn.finance, and the income generated will automatically repay the debts generated by minting nUSD, indirectly reducing the over-collateralization rate of assets.In-depth analysis of Naos Finance mainnet Formation》
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Real World Asset Lending Protocol Galaxy
DeFi users who provide stable currency funds in Galaxy's lending pool can not only receive interest on loans, but also receive token NAOS rewards. In addition, 20% of Formation's revenue will go to NAOS Treasury, part of which will be used to subsidize Galaxy's revenue. It is not difficult to see from this that the mechanism of Galaxy’s multiple returns aims to provide DeFi users with a competitive return on investment in stablecoins.
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The two sub-protocols cooperate with each other to enable NAOS Finance to realize a full set of functions of liquidity + lending + insurance
After a brief understanding of the basic functions of the two sub-protocols, users may have doubts. The part of real assets on-chain to realize lending can be realized by the Galaxy protocol. Why do we need a liquidity protocol, Formation?
Running NAOS Finance with the structure of two sub-protocols is one of the highlights of the protocol design. The relationship between the two sub-protocols and their respective functions can be understood with the division of labor of traditional banks.Equivalent to the part of borrowing with institutions, Galaxy has a Real World Assets Pool (Real World Assets Pool), which is divided into two parts: the Alpha Pool of the loan pool and the Beta Pool of the insurance pool. Among them, Alpha Pool presents the real-world assets used for mortgage after being chained in the form of a fund pool, allowing users who pass KYC to provide funds according to the targets in the fund pool. The fund pool of Beta Pool is composed of nUSD recharged by users. The purpose is to serve as insurance for the default of borrowers in the Alpha pool. When a default occurs, the platform will automatically liquidate and use the funds of Beta Pool to compensate users.
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It is equivalent to the deposit-absorbing part of traditional banks, which can gather the idle funds of individual investors in the DeFi world. The principal deposited by the user will be invested in the interest-earning agreement to earn fixed income, and the minted nUSD can be invested in the insurance pool Beta Pool to earn income. In this case, even if there is a compensation in the Alpha pool, the user's principal is still safe, and the principal will continue to be deposited in Formation, and the fixed income generated through the income aggregation agreement will make up for the loss of nUSD in the Beta Pool.
Just as a bank has established different departments according to different user needs, but each department operates collaboratively, the two sub-protocols cooperate with each other to realize deposit absorption, loan lending and insurance functions in a decentralized manner. In other words, the complex structure of NAOS Finance aims to establish a DeFi protocol that combines the functions of MakerDAO, Aave and Nexus Mutual.
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It is undeniable that traditional banks are the main source of indirect financing for enterprises. Due to their centralized mechanism and singleness of credit review, there are problems such as difficulties in global capital circulation and difficulties in lending for small and medium-sized enterprises in the actual lending business. So can the decentralized lending solution given by NAOS Finance solve these problems?
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Has it solved the corporate borrowing problem?
The characteristics of DeFi without intermediaries and permission are the key to solving this practical problem. NAOS Finance is a DeFi protocol that connects real-world assets. Its vision is to use blockchain technology and capital cost differences between different regions to bridge the global corporate funding gap, allowing large companies to obtain global funds with lower capital costs. To allow SMEs to have the opportunity to borrow the funds they need for development. In addition, NAOS Finance has advantages in terms of compliance and real-world asset volume. It has held financial licenses in many countries, and has reached cooperation with more than 2,000 small and medium-sized enterprises, with real-world cooperation assets of nearly US$300 million.
Has the trust problem been solved?
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In addition, how to break the traditional credit rating system is also one of the trust issues that need to be solved urgently. Traditional lending has gradually transitioned from mortgage loans to credit loans. The accumulated repayment data and financial data of users have become credit scoring standards, but some MSMEs cannot provide sufficient credible financial data or proof of assets to meet credit scoring criteria. NAOS Finance cooperates with IoTeX, an Internet of Things blockchain platform, to introduce non-financial data into credit risk assessment and provide a more friendly credit assessment solution for small, medium and micro enterprises when lending. In addition to IoTeX, NAOS Finance is still through strategic cooperation with other agreements to finally provide the community with a complete decentralized credit rating system and create a more intuitive decentralized asset on-chain and lending process.
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