Introduction to ASKOLend
ASKOLend is the core of the rASKO Money Market, it is a substantially modified fork of Compound Finance. Compound is a decentralized, overcollateralized loans protocol built on Ethereum. ASKOLend substantially differs from Compound: it’s a multichain lending platform, accessible to low, mid, and high market cap tokens due to unique risk management tools introduced by ASKO team. In addition, lenders are able to select between high and low-risk lending pools, plus there are number of fail safes which are unique to ASKOLend, ensuring high level of security for our users. These and other differences lead to benefits of ASKOLend over Compound.
With ASKOLend's utilization of BSC, the cost and speed per transaction are significantly improved compared to Compound and Ethereum. With ASKOLend’s accessibility to lend/borrow of low, mid, and high market cap tokens, the potential scope of ASKOLend’s lending and borrowing markets are vast; ASKOLend has the capacity to list ~70 assets, compared to the few assets currently listed on Compound. Lastly, with ASKOLend, lenders can pick their allocation between high-risk and low-risk lending tiers for overcollateralized lending, allowing lenders an element of customization in their investment that isn’t available with Compound.
In institutional finance, similarly to ASKOLend’s high-risk and low-risk lending pools, lenders frequently have the ability to pick between an array of asset classes with different risk profiles in the case of insolvency. An excellent example is the corporate bond market. While covenants vary from company to company, commonly, there are several classes of bonds that receive different priorities in the case of bankruptcy.
For decentralized lending platforms today, no such system exists. In the largest platforms, lenders pool their assets into a single class for each asset. Any losses to the class from insolvent loans are equally passed to all investors. Since the risk of insolvency is generally not emphasized to lenders, these platforms are forced to take extraordinarily cautious approaches to prevent insolvency. Assets must be carefully vetted and collateralization ratios set high enough to prevent insolvency from ever occurring.
Tiered lending pools solve these issues by informing investors of insolvency risks and allowing them to allocate assets to gain additional interest from taking on insolvency risk. Lenders in the high-risk pool must fully cover insolvency before the low-risk pool is ever touched. This allows ASKOLend to create a more open platform that accepts a wider variety of tokens with highly competitive collateralization ratios.
Several somewhat recent advances in cryptocurrency enable ASKOLend to function properly. UniswapV2 and Pancakeswap provide effective price oracles that are difficult to manipulate. The rise of decentralized liquidity on decentralized exchanges like Pancakeswap creates lower risks for lending against low and mid-market cap tokens. The influence of several market factors on ASKOLend’s functionality should be taken into consideration as well, including the influx of institutional investment into cryptocurrency, increasing adoption of BSC, and the altcoin market passing a 1 Trillion USD market cap. These factors culminate as hard evidence of low and mid-cap assets becoming a competitive and established asset class. This evidence provides sound grounds to begin to establish financial tools for low and mid-cap tokens, such as a borrowing and lending protocol, like ASKOLend/rASKO Money Market.
Like Compound, in order to borrow on ASKOLend, you must be a lender. To be a lender, you opt to interact with one of ASKOLend’s contracts, selecting a token to deposit, and a risk category. In doing so, you’ve deposited your token for another token, which represents your token and the risk category you’ve selected, high or low. The tokens you receive via lending are called risk tokens. In addition to representing the value of the original token, these risk tokens accrue interest from borrowers (see APR section for more detail).
Given you’ve opted for the low-risk category as a lender, you can use your low-risk tokens as collateral in order to borrow, however, high-risk tokens can’t be used as collateral. Using your low-risk tokens as collateral, you may borrow a token at a quantity based on the collateralization ratio. For example, if the collateralization ratio for borrowing a token is 150%, then, given the lent and borrowed tokens are equal value, 1.5 low-risk tokens allow you to borrow 1 token. The tokens that are borrowed are yours, but you have to pay interest in the token you’re borrowing, depending on the borrow market’s APR. To get your collateral back, you must first repay the loan.