Cross Chain DeFi Borrowing Aggregation | Fuji Protocol | Boyan & Daigaro | Polygon Alpha Podcast

Audio from the September 23, 2022 installment of “Polygon Alpha” with Boyan Barakov & Daigaro Cota - Co-founders of Fuji Protocol.

LinkTree - https://linktr.ee/polygonalphapodcast

Polygon Alpha Shorts - https://tinyurl.com/PolygonAlphaShorts

YouTube - https://www.youtube.com/c/PolygonTV

Apple - Follow the show on Apple Podcast!

Spotify - Follow the show on Spotify!

RSS feed - https://api.substack.com/feed/podcast/863588.rss

Fuji Protocol

- Many protocol aggregators already exist on the subject of decentralized exchanges and yield optimization.

- However, practical lending-borrowing aggregators with a focus on minimizing cost for borrowers still do not exist.

- Fuji sets out on a mission to fix this.

- The idea of a lending-borrowing aggregator was born during ETHGlobal "MarketMake" hackathon in January 2021, where the founders met.

- Problems DeFi borrowers face today include:

1) High volatility - Variable rates change constantly due to market supply and demand. Users who choose to borrow from the cheapest provider today can find themselves paying a lot more interest just a few days after.

2) High management costs - Managing a debt position is time-consuming. It requires resources to monitor borrowing rates and to take appropriate actions based on market conditions. High gas fees increase transaction costs.

- Fuji DAO built the first borrowing aggregator. - It aims to optimize loan expenses for DeFi users.

- The protocol achieves this by constantly monitoring borrow markets and whenever there is a better rate, it automatically refinances the whole pool of debt.

- The advantages of Fuji compared to interacting directly with a base protocol are:

1) cost optimization - minimize the interest paid by borrowers

2) economics of scale - pooling funds together reduce the transactional costs by sharing fixed costs

3) time-saving - removal of constant attention users need to pay to find optimal rates

4) smooth UX - manage easily all debt positions from one place

- Fuji DAO creates vaults where users deposit a single asset as collateral and borrow against it another asset.

- For example, in the ETH/DAI vault, users deposit ETH and borrow DAI.

- Thus, isolating debt positions allows for better risk management and the most effective interest rate optimizations.

- When users borrow from a Fuji vault, the needed liquidity gets sourced directly from the base protocol proposing the best rate (Compound, Aave, dYdX, and more to come).

- The protocol keeps track of users' individual positions and assures the overall vault's health through a classical liquidation mechanism.

- To avoid liquidation, users need to maintain the proportion of their debt to the amount of collateral they provided above a certain threshold.

- When market conditions change and there's a provider with a lower borrow rate for a certain asset, the protocol triggers a rebalance operation and refinances the whole position of the vault.

- In that way, users instantaneously get a better rate on their loans without the need to take any action on their side.

Host: Justin Havins aka Crypto Texan

AV Engineer: Aaron Pettijohn

Polygon official channel:

Website: polygon.technology

Twitter: twitter.com/0xPolygon

Telegram Community: t.me/polygonofficial

Telegram announcement: t.me/PolygonAnnouncements

Reddit: www.reddit.com/r/0xPolygon/

Discord: discord.com/invite/polygon

Facebook: www.facebook.com/0xPolygon.Technology/

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit polygonalpha.substack.com