Last updated on May 29th, 2023 at 11:19 am
In recent years, decentralized finance (DeFi) experienced rapid growth. This key crypto sector provides people with unrestricted, open, and transparent access to financial instruments.
People can use BNB Chain, Ethereum, Avalanche, and other networks to access a wide range of financial services with just a few clicks.
The mission of BENQI is to increase participation in two fundamental financial products (liquid staking and lending and borrowing) by making them more accessible to a broader audience.
This article comprehensively explores the role BENQI plays in the DeFi industry.
What is BENQI?
BENQI is a decentralized non-custodial liquidity market protocol based on the Avalanche blockchain.
The protocol allows users to instantly lend, borrow, and earn interest on digital assets. It comprises BENQI Liquid Staking and the BENQI Liquidity Market.
BENQI Liquid Staking (BLS)
This liquid staking service on Avalanche allows users to access locked capital staked with Avalanche validators. This function enables them to derive even more value from their income-producing assets without having to endure time-consuming cross-chain transfers or incurring costly lock-ups.
BENQI Liquidity Market (BLM)
BLM refers to BENQI’s lending and borrowing protocol. Users can list their crypto assets for lending and borrowing via permissionless smart contracts. Users get defined returns when they put their assets on the market. Lending is done through over-collateralization.
What is Avalanche?
Avalanche is an open-source system designed to facilitate the creation and distribution of decentralized applications (dApps) and other blockchains. The ecosystem is very flexible and can handle 4500 transactions per second (tps) of global finance.
Transaction fees and staking for network security are both paid for with AVAX, the platform’s native token. It also serves as a way to determine the value of the different assets traded on the platform.
How BENQI Works
BENQI can provide its users with quick lending services because it uses a sophisticated algorithmic liquidity market protocol. The network uses the Avalanche blockchain. Avalanche’s multi-blockchain architecture allows for fast transaction processing. The fact that Avalanche separates the validation process from the actions of smart contracts makes it very scalable.
The company’s flagship offering is the peer-to-peer (P2P) lending protocol developed by BENQI. This infrastructure facilitates the safe lending and borrowing of tokens. Multiple security measures are built into the system to protect lenders from losses. One requirement is that the loan must be well-secured by the borrower’s assets.
The Safety Module is an extra betting pool meant to compensate for any possible losses. A user can stake QI in a Safety Module and be rewarded with tokens from the protocol’s reserve pool. With these extra safety measures, users are better protected from harm and have more faith in the network.
QI tokens can be staked in different ways. Most users choose to stake in liquidity pools on decentralized exchanges (DEXs) like Pangolin or the QI token pool directly through the BENQI protocol. In today’s gaming world, staking is a highly sought-after option. Users who fund a smart contract for a specified period expect a return on their investment. For this reason, staking is highly recommended for newbie traders.
BENQI’s native token, QI, is used for various purposes within the ecosystem. QI must be held to use the network’s lending and staking features. This token can also be used to transfer funds. It also plays a significant role in the community’s overall administrative structure.
A DAO (Decentralized Autonomous Organization) is used to maintain consonance in the BENQI network. These systems eliminate the need for intermediaries by allowing users to vote on important platform upgrades and modifications. Fee adjustments, new features, token burns, and other changes are all examples of possible upgrades.
Problems BENQI Solves
The DeFi industry has expanded rapidly over the past three years. Most of DeFi’s operations are now being carried out on Ethereum, which has led to congestion and, consequently, high network fees. This is a major challenge for veteran users and newcomers with less money to invest in DeFi.
BENQI’s Liquidity Market Protocol, built on a distributed and scalable infrastructure, is intended to address these issues. BENQI will make it easier for everyone to get access to decentralized financial products by making it possible for users to:
- Quickly supply and withdraw liquidity from a pooled liquidity market.
- Borrow money immediately from a liquidity market by pledging their assets as collateral.
- View real-time, transparent interest rates based on the asset’s supply and demand in the market at all times.
The main issues that BENQI helps with are:
Obtaining Loans Within a Shorter Time Frame
Access to loans can be significantly enhanced by using DeFi lending protocols like BENQI. Thanks to these networks, users can get their hands on funds much more quickly. Obtaining a loan from a centralized service, such as a bank, can be a lengthy process that necessitates several actions, including fulfilling collateralization prerequisites. It may take weeks for a bank to issue a loan after all these requirements have been met.
Centralized banks typically limit the options of the average borrower. Customers often experience difficulty getting precise information about the bank’s lending profits, history, etc. By leveraging blockchain technology, BENQI adds yet another layer of transparency. In almost real-time, anyone on the network with a blockchain explorer can get any information they need.
Lending services have steadily increased their rates over the past decade. There are a plethora of confusing and costly fees associated with today’s conventional lending system. Due to these costs, many companies and individuals have been discouraged from pursuing financing. By cutting out the intermediaries, BENQI’s decentralized design makes these costs significantly lower. Users give each other loans, with the proceeds being reinvested in the network.
BENQI Token (QI)
The QI token (a native asset on Avalanche) manages the entire BENQI protocol ecosystem, from the Treasury to any future updates.
QI is used to cast a vote and determine the outcome of proposals through BENQI Improvement Proposals. The protocol’s initial leaders will be its creators, but eventually, it will be run by a DAO. Holders of the QI token will have a voice in the governance of the protocol as a whole, making proposals and casting votes on important issues as part of the DAO.
QI will have a maximum supply of 7,200,000,000 tokens, all of which are expected to be mined and distributed by the beginning of Q1 2024. QI tokens will be distributed in a way that prioritizes platform users who actively participate in the market. The Liquidity Mining Program will be the primary means by which tokens will be distributed.
How to Buy the QI token
Users can buy and sell QI on the following exchanges:
Binance is the most popular cryptocurrency exchange in most countries, including Canada, Australia, Singapore, the United Kingdom, and the United States. However, the sale of QI to US citizens is prohibited.
WazirX is a cryptocurrency exchange backed by the reputable Binance Group. The platform is ideal for Indian users.
KuCoin is a cryptocurrency exchange that currently supports over 300 alternative tokens. It currently provides services to both foreign and US-based customers. KuCoin is usually the first exchange that comes to mind when looking for a place to buy newly released tokens.
- BENQI’s plans are as solid as ever as the protocol cements its position on the Avalanche C-Chain as the primary infrastructure for DeFi operations. BENQI is in prime position to create new features that will appeal to users who wish to make use of DeFi in unlocking liquidity and earning yield in a permissionless fashion by bootstrapping growth and liquidity on the C-Chain.
- The BENQI lending protocol is just one more way in which DeFi is gaining traction as a viable option for borrowers in countries all over the world. The market benefits from the increased convenience and revenue generated by these systems. Users can customize how they use the most popular parts of the DeFi network, making it easier for them to make money.
- BENQI provides solutions to most of the lending problems people face in the modern world. The network helps make lending simpler and more accessible to the general public.
- Borrowers do not have to worry about trying to persuade arbitrary lending decision-makers. Users only need to provide the necessary collateral to obtain the loans required to expand their businesses or trade strategies.
- To use this protocol, a user only needs a Web3 wallet, an internet connection, and some money. It is compatible with other DeFi platforms and was designed to be easy to use.
Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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